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If you think that starting a business might be for you, check out this quick guide to mumpreneurship, just be aware that there are some downsides to starting your own business. You’re probably already aware that big businesses are sometimes the victim of fraud but most people assume that it won’t happen to a small home business. Why would criminals bother coming after a mum who is running a tiny business from her living room and only making a small amount of money? The thing is, it’s that attitude that makes you more of a target because small, home based businesses are far less likely to take the right steps to protect themselves, so it’s a lot easier for criminals to get at their money, which is why it’s important that you’re prepared.
I thought just that, my blog is so small nobody would focus on me so I wasn’t worried about it. The past week or so when i’ve been sharing my posts to Facebook i’ve noticed an odd link was being shared. I had been HACKED! I was devastated. I have managed to remove the hack but it has still left an imprint on the site that will take time and probably lots of money to resolve.
So what are the types of fraud that could affect your home based business and how you can protect yourself against them effectively.
Identity Theft
Identity theft is something that could affect you and your customers, and the results can be devastating. If criminals can steal your identity, they could potentially access all of your business accounts and clean you out. These people are very well practiced at this kind of thing and they’ll move the money around very quickly so most of the time, it’s very difficult to get it back once it’s happened.
In order to steal your identity, fraudsters need things like bank statements and other financial documents, so it’s important that you keep these safe. Any that you have in the house should be kept locked away in a filing cabinet, not just left lying around where they can easily be misplaced. You also need to be careful about throwing things away because fraudsters will often go through the bins to find this stuff. Make sure that you destroy anything to do with money before it goes in the bin so they can’t get any information from it. Try using a shredder for peace of mind.
It’s not just you that could be the victim of identity fraud either, it’s your customers. If fraudsters can get hold of the necessary information to impersonate a customer, they may contact your business to ask for refunds into a different account or to buy things using your customer’s credit card. That’s bad news for you because if it’s your fault, you’re likely to get a fine for not protecting their information properly and you’ll lose the trust of that customer for good. They’re likely to tell their friends and family about it as well, so you’ll lose those potential customers as well. That’s why it’s so important that you take steps to ensure that you are talking to the right person before you take any action or release any details about their account. Know Your Customer (KYC) is a concept that is used in banking to make sure that transfers are secure and they’re going to the right person, however, KYC compliance is good practice for all businesses because you can be sure that the customer is who they say they are. There is some great KYC software out there that will help to verify customers across a range of platforms so you can always be safe.
When speaking with customers on the phone, you need to make sure that you’re following data protection procedure which is a legal requirement. If you aren’t asking security questions before you action anything on their account, you’re opening yourself up to fraud and you could be on the wrong side of the law.
Return Fraud
Return fraud is very common and it affects most businesses. It’s simple and there are a few ways that people might try to do it. The most common way that people attempt return fraud is by purchasing a product, using it for a while, and then returning it even though there isn’t anything wrong with it. When the product has been opened and used, you can’t sell it at full price again and you don’t have the money for it, so you’re losing out.
If you’re going to protect yourself from return fraud, you need to have a strict returns policy. Always require receipts and make sure that you keep a record of purchases on customer accounts. You also need to have clear guidelines about acceptable reasons for a return. If the product isn’t damaged or defective and it comes as advertised, you should refuse to give out a refund.
Payroll Fraud
When the business starts getting a little bigger and you’re thinking about hiring some employees, you need to watch out for payroll fraud. It’s likely that you’ll be hiring remote workers if you’re running the business from home so you might be more likely to experience this. There are a few ways that payroll fraud occurs but the thing that you need to watch out for most is people reporting hours that they haven’t worked. It’s fairly easy for remote workers to do this, so you need to be cautious. If you’re paying freelancers and remote workers, it’s best to pay people per project rather than tracking their hours so they can’t inflate the number of hours that they’ve worked.
If, like me, you think that fraudsters won’t be interested in your small, home based business, you’re wrong. That’s why it’s important to be aware of these different types of fraud and take steps to protect yourself.
Until the next post,
Are and Pops.
**This is a collaborative post**
