4 Fraudulent Activities That Harm Small Business

Businesses large and small have to deal with scams and fraud on a near-daily basis. The range of these attempts puts pressure on not just the company but individual employees and company partners too. Understanding what can happen is instrumental in stopping it before it starts and having a back-up plan for it if prevention fails.

  1. Invoice Fraud

If you run a business with multiple partners or traders, then invoices for goods and services will be integral to your operation. These invoices, however, are a key weakness in the company. By being able to be intercepted and edited, these invoices provide an opportunity for payment to be diverted. A fraudster can manipulate invoices to feed their personal accounts, leaving you out of pocket while owing the original invoices their pay.


Ensure all your invoice forms request a phone number and other contact details that you actively update and communicate with. The extra time it takes to standardize and follow through with that communication will be worth the money and time you save later on cleaning up fraud. Having a dedicated IT team can help alleviate that checking process.

  1. Employee Identity Fraud

Identity Fraud can manifest in a number of ways, from an employee literally having a fake identity to a single employee creating a second entry on the payroll to receive two payments. It can also occur when personal data is stolen from an employee through a lapse in cybersecurity and money that was intended for the very real employee goes to the thief. In this way, it can be internal or external fraud.


Use standardized work hardware when working from home. Home computers connected to work networks are much more of a risk than workplace computers, as home computers contain personal accounts and information that workplace systems don’t. Protecting employee data is vital. Direct Deposit payment can solve the issue, although it is not a universal solution.

  1. Chargebacks

Chargebacks can occur for a variety of reasons but mostly revolve around fraud or theft. A chargeback is a type of refund that brings funds out of your business because of an amount falsely spent by a customer card. Essentially, every time a fraudster completes a transaction with a stolen card or a merchant fails to properly execute a transaction, you are charged the money to restore the accounts. This, however, leads to a whole host of financial problems with tracking your own transactions, sales and profits.


With over 45% of companies simply not solving this issue and deciding to eat the cost, the solution is to invest in quality chargeback management. The time and cost of chasing chargebacks is worth having a team and system set up to automate and regulate. Chargebacks are purely external to the company, so prevention isn’t an option, but preparation and management of the problem is.

  1. Asset Misappropriation

Asset Misappropriation is an internal fraud that is basically a simple theft. By accessing a company account or card, or even assets like equipment, employees have the potential to seize those assets for themselves.


Inventorying important hardware and software licenses is a good step towards managing the assets. One key way to ensure prevention of theft is to have a timetable of duty for your employees that cycle them through different assets. That way, employees will notice discrepancies between each other, and any thought to steal assets becomes harder to plan, harder to execute, and almost impossible to get away with.