Small Business Guides

How to protect your business from payment fraud

5 min read

Does your business pay bills using cheques? Do you send out printed invoices? You could be revealing sensitive business information to criminals. We spoke to online bill payment company Bill.com to find out you can avoid payment fraud.

Small businesses tend to use paper documents

Payment fraud costs US companies billions of dollars every year. So it’s an issue every business needs to be concerned about.

Larger companies often use enterprise accounting software for bill payments, invoicing and other transactions. Small businesses often have fewer people and resources available for accounting tasks. Which is why many business owners record their transactions on paper. While that may sound like an easy option, there are hidden dangers with using paper documents. Here’s what the team a Bill.com told us about the best ways to protect your business from payment fraud.

Online bill payment software is fast, easy – and safe

It’s much safer and easier to use a payments solution that enables you to do all your work online. Online payment software makes it easy to pay your bills online quickly and easily from anywhere – as long as you have an internet connection. And you only have to key in data once, which means fewer errors – and no more manual double entry.

Using paper cheques and invoices is risky

Payment fraud resulting from paper documents is a real threat for small businesses. Many accountants recommend that their clients switch to online accounting applications instead. The results from a recent survey of 540 accountants and bookkeepers are revealing:

  • Almost half of accountants advise against paying bills using cheques
    Every cheque you write has your company name, address, bank, account number and routing number. That’s all a criminal needs to carry out check fraud. Paper invoices and contracts raise the risk of your sensitive business information falling into the wrong hands.

    Of the accountants surveyed, 45 percent were aware of these dangers. Many had tried and failed to get their clients to do their bill payments online. An amazing 73 percent of their clients still used a computer to print cheques and 37 percent used handwritten cheques.

  • Paper documents make it harder to manage bill payments
    A typical bill payment can involve up to 20 steps. That’s a long chain of processes to manage, particularly with an awkward folder of paper documents to carry around. That's why 64 percent of survey respondents think paper documents make it harder to manage bill payments. And the workflow can get bogged down at any point, raising the risk of fraud.

    It’s also hard to separate duties in a small business where one person may do many tasks. If the same person carries out both money handling and record keeping, that's another opportunity for fraud.

  • Your business stands a good chance of being targeted by criminals
    Of the accountants surveyed, 30 percent said one of their clients had been the victim of payment fraud. This shows just how real the danger is. Criminals are more likely to target small businesses because they rely on paper-based systems. About 120 million Americans work in small businesses so that’s a lot of incomes at risk.
Paper cheques and invoices contain information that can be used to commit fraud.

Five ways to reduce your risk of payment fraud

The great news is online payment software can help you get rid of paper documents forever. And with a few other simple measures in place, your business can further reduce the risk of fraud.

  1. Get rid of paper cheques and invoices
    Paper cheques and invoices contain information that can be used to commit fraud. So the best way to protect your business is to get rid of them completely. Moving to an online or cloud-based accounting system helps keep your information secure. You can access your information securely from anywhere – at any time. And you can send out online invoices or make payments from your laptop or smartphone quickly and easily.
  2. Cut out manual processes
    There are software packages that eliminate the need to do everything manually. Online payment and accounting systems can automate many manual bill payment and accounting processes.

    You can scan or email your bills to online payment solutions that will take care of all the payments online. Your information is stored, tracked and updated online so you can shred your paper documents and get on with more important tasks.

  3. Do what you can to prevent fraud
    Take a look at your business and figure out where fraud is most likely to happen. Then create ways of doing things that make the risk of fraud less likely. Write clear standards of behaviour into your employee manual. Let your people know what the penalties will be for fraud. Think about setting up a ‘tip line’, as a large percentage of fraud is uncovered through tips.
  4. Split up important tasks
    Divide up tasks so that no single employee has complete control over an area of your business. Get different people to handle the approval, processing and recording of your transactions. Review every payroll cheque yourself. Reduce the number of people with cheque signing authority.
  5. Keep tabs on your business internally
    Do regular internal audits. Consider getting an outside accountant to do an independent review of your systems.

Is it time you binned paper cheques and invoices for good?

It looks like the paperless office has finally arrived. Small business owners can now reduce the risk of fraud in one easy stroke by moving to online payments. In the survey, 41 percent of accountants said they were moving to bill payments online within six months.

Making payments online reduces your risk of fraud and streamlines your workflow – and that’s got to be good for business.