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Business Owners & Experts Share Their Tips on Preventing Four Common Types of Fraud


Ben Goldstein


Fraud is a growing problem across the U.S., and small businesses are the most susceptible victims because they have small accounting departments — often consisting of a single person — and busy business owners don’t always take the time to ensure that proper fraud-prevention steps are in place. Twenty-eight percent of small business owners are hit with fraud each year. We gathered business owners and fraud experts to share tips on how to avoid being part of this statistic and protect your business assets.


Credit card fraud is rampant within the United States, contributing to 47 percent of the world’s credit fraud. And, it has continued to rise. In 2014, nearly 31.8 million U.S. consumers had their credit cards stolen — more than three times the number of people affected in 2013. With credit card fraud a common problem, it’s important for small business owners to take steps to protect their business credit cards and prevent chargebacks on their business transactions.

Zondra Wilson, president and CEO of Blue Skin Care, recommends separating your personal banking and credit cards from your business accounts – this will ensure fraudsters don’t get their hands on all of your money if fraud happens to you. Separating your accounts will also make it easier to track your business expenses, report deductions on your tax return, and build your business credit.

“Make sure you use your card wisely,” Wilson said. “Don’t hand over your plastic or your card number to employees or companies with which you don’t have a familiar relationship.”

Much like credit card fraud, fraudulent online orders is also on the rise. According to LexisNexis 2016 True Cost of Fraud℠, every month there are an average of 206 fraudulent online transactions, which costs merchants $2.40 for every dollar stolen.

Dave Hermansen — the Store Coach — has 13 years of experience with eCommerce sites, including running more than 60 successful online stores. Hermansen has seen his fair share of credit card fraud in the last decade and attributes it to the fact that the customer and credit card are not present, making it a lot easier for fraudsters to complete online transactions. Hermansen said an easy way to ensure that fraud almost never happens is to set up a procedure where you’re always verifying purchases when the shipping and billing address don’t match.

“Require a phone number in your online ordering form and call the customer if the addresses do not match,” Hermansen said. “99.9% of the time, someone who is trying to commit fraud IS NOT going to provide a real phone number. If you reach the customer by phone, it is pretty much guaranteed that it is a legitimate transaction. Use the excuse that you’re calling to make sure they had a pleasant shopping experience and were able to find everything they wanted. If you are still in doubt, have them email or fax a copy of the credit card and/or a utility bill with the ship-to address (for their protection).”

Hermansen also recommends using a service such as Signifyd to verify all transactions. For a small 1% transaction fee, Signifyd will automatically check all of your orders and cover you 100% against fraud.

Etty Berkowitz owns online kids clothing site Mini Me Miami and attributes her success in preventing fraud to Shopify, which is a platform she uses to run her eCommerce store. Shopify helps her detect and block fraud by adding red flags when suspicious orders come through. Much like Hermansen, she’s developed her own process to triple check orders that are marked as fraud by Shopify to ensure she’s not turning away true paying customers.

“Not everything with red flags is indeed fraudulent, so I always do my own research as well,” Berkowitz said. “My first step is usually just to Google the name, address or email address and see what I can find. If there is a phone number I will try to call and reach the customer. Usually if I can reach the customer either by phone or email, I am able to verify and confirm the order. If an order comes up as suspicious and I am unable to reach the customer or they don’t respond to my messages, then I will cancel the order and mark it as fraud.”

David Batchelor, president and cofounder of DialMyCalls.com, has reduced online credit card fraud by 75% by cross-checking shipping and billing address as well.

“The only downside is sometimes you might stop customers who are on vacation or in another location for a legitimate reason,” Batchelor said. “Because of this we are very sure about quickly checking denied orders and reaching out to them if they appear legitimate and we will manually process the order for them if everything checks out.”


Cash fraud is not thought about as often as credit card fraud, but it’s still something business owners with brick-and-mortar locations should be prepared for. Alex Reichmann, founder and CEO of iTestCash.com shares tips on how to avoid ending up with useless cash:

“One of the easiest ways to protect yourself against cash fraud is by learning about all the security features that is on currency,” Reichmann said. “This includes how portraits look on bills, security strips that can be seen with UV lights, analyzing the serial numbers to see if they look even, examining the bills borders so they look even, and spotting the watermark on bills.”


Unfortunately, occupational fraud from employees is the most damaging to businesses and comes from the people you should be able to trust the most. The Association of Certified Fraud Examiners (ACFE)’s global 2016 study on occupational fraud found that the median loss for a single case of occupational fraud is $150,000.

Ben Walker, CEO of Transcription Outsourcing, LLC has a few different ways that he combats fraud from prospective employees and independent contractors. He hires an investigation company to run background checks for all employees joining his business, then double checks it using a government agency who runs additional background checks in case anything is missed. His team also runs their own social media and Google address searches for an extra layer of scrutiny.

“Without a doubt I would start with at least a Google search for both people and businesses, because you can sometimes find everything you need for a hiring decision or business partnering decisions,” Walker said.

Shoshanah Posner, who works for NoFraud, a fraud prevention solution that screens eCommerce transactions for fraud, said that fraudsters are on the lookout for items they can sell for cash, so businesses that sell gift cards, jewelry, and electronics are at a higher-risk for fraud than other businesses. Much like Hermansen, she recommends enlisting a fraud prevention service such as NoFraud and Signifyd, that keep up on the ever-changing tactics of fraudsters.

“Fighting fraud can be time consuming and costly,” Posner said. “As a business owner, there are so many tasks that need to be accomplished to grow your business, and fraud prevention can be easily, inexpensively and effectively outsourced to professionals.”

Related: Do Business Owners Need Identity Theft Insurance?