Research suggests that a significant number of businesses each year are victims of payment fraud, and that they’d suffered cash losses as a direct result.
As well as the monetary impact, they suffered other consequences such as lowered staff morale and had a negative influence on client relationships.
Payment fraud can be difficult to detect – most business owners want to assume payments for their goods or services are legitimate. Because there are a number of ways to commit payment fraud, it’s vital that business owners are aware of them. This important not only for how you receive payments, but also for how you’re paying your creditors.
Among the most common methods of payment fraud are the following:
Although payment fraud tends to happen most commonly in retail businesses, they’re not the only ones vulnerable by any means. Fraud can happen when people order products online and then don’t pay for them, or they use your service and then find a reason not to pay the bill.
Online businesses often experience payment fraud when customers have paid by credit card on the internet. The funds appear in your account and you send them the goods – should be safe, right? Not always – a common trick is that the customer will cancel the payment after 3 days and the bank reverses the funds.
Another common internet problem is when a customer places and pays for a very small order for equipment/stock which is fine. They then place a very large order (without paying) which you send. But this is the fraud you don’t suspect.
As in most cases, prevention’s always better than a cure. Chasing up people who’ve swindled you is time-consuming, stressful and not always successful. It’s far better to have measures in place to prevent payment fraud happening in the first place.
Some of the best ways to avoid payment fraud are:
Offering debit or credit card options, taking payments electronically using mobile payment methods, not accepting checks and ensuring your store has a good surveillance system are all good ways to prevent fraud.
Checks are one of the most commonly used methods of payment fraud, even today. They’re costing businesses millions of dollars, because they’re so easy for fraudsters to steal. And because there’s a delay between depositing the cheque and having the funds cleared into your account, customers hope to receive the goods before you’ve discovered you haven’t been paid after all.
Checks are paper based, so they’re easy to copy or forge, and they’re mailed, so they can be intercepted. This is where you, as a business owner, can be liable for payment fraud yourself if you’re using cheques to pay suppliers.
Your basic rule-of-thumb here is to avoid them, both for making and receiving payments. One option is to not accept checks at all, where there’s a wealth of online and electronic options available.
Your goal should be to protect your business from payment fraud using the most up-to-date payment options available and moving away from old paper-based systems. The better the technology, the better the security will be, and the harder fraudsters will find it to get around the systems.