5 types of fraud every SMB should be aware of

In March 2021, Roger officially became Corpay One. To learn more and understand the change, read this blog post.

We're here with a new exciting feature that lets you handle accounts payable collaboratively in your organization or with your accountant. Refresh your Roger web application to see our new communication tab in your overview. This feature is so much more powerful than its simple appearance.

Accounts Payable and managing your vendors is something that typically happens in silos, performed by one or two people in the organization or left to an external bookkeeper to handle. What are the issues with that setup? When accounts payable is managed by just one or few people, several problems arise.

1. Your controller or bookkeeper has to hunt people down for approvals, details and more information about a particular bill or expense. This takes time (more time than you'd like!) and, combined with other manual processes, can bring the cost of processing a single invoice north of $25-40.
2. Details and information about a vendor and a payment is not stored for the future but remain in a few people's inboxes and/or brains with no options for future reference.
3. Conversations pertaining to payments are not traceable in an audit log and can cause issues if you're being audited.
4. External AP fraud is more common than most businesses think and on average small businesses lose 5% of revenues every year to payments fraud. A common way to commit fraud is by pretending to be a C-level executive and email back and forth with the AP staff to initiate a fake payment. When you're using Roger as intended and don't deviate from your processes, CEO fraud becomes close to impossible.
5. Occupational fraud, although no one likes to think it can happen in their business, is a real concern. When invoices are approved, paid and recorded by just one or a few individuals, internal/occupational fraud is not only easier but a lot more likely to happen.

The new collaborative chat feature helps address these points - and we can't wait for you to discover the power that lies in making your financial processes more collaborative.

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Fraud does not discriminate. Anyone whose phone has been ringing with automated calls from unrecognized numbers can attest to that. Yet, a common misconception is that only individuals are targeted, when businesses, too, are affected by fraudulent activities.

And SMBs are particularly at risk.

According the 2018 Global Study on Occupational Fraud and Abuse, published by the Association of Certified Fraud Examiners, small businesses lost almost twice as much per scheme to fraud in 2017, with a median loss of $200,000 for companies with fewer than 100 employees. The data is clear, and the threat to SMBs is real.

Here are five frauds and schemes for SMBs to keep an eye out for.

Fraudulent Transactions
These kinds of fraudulent charges typically originate from stolen credit cards or hacked bank accounts. Why should SMBs be on alert? Because processing payment on fraudulent transactions and then honoring refund requests (aka, “chargebacks”) can be quite costly.

Clean Fraud
Is there such a thing? Yes. Using stolen information, data, and forms of payment, fraudsters can impersonate others to circumvent digital fraud detection measures. This has become increasingly common, and is more difficult to detect than outright fraudulent charges (which are more likely to catch the attention of both the business and the legitimate account holder).

Account Breaches
Hacking and other cybercrimes can be used to steal passwords and gain illegal access to accounts. While it’s usually data breaches at large companies that grab headlines, many SMBs are left reeling from cyber attacks every year.

Phishing Scams
Phishing is a tactic scammers use to coax people into voluntarily giving up sensitive personal information or even money. The most common examples occur through email and over the phone. For example, scammers might target SMB employees posing as the IRS to get W-2s, a scam that can compromise both employees and the businesses they work for.

Internal Theft and Fraud
Sadly, sometimes internal employees, including members of accounting departments, commit fraud. According to a study by Statistic Brain, employee theft totals $50 billion each year. Sometimes, it’s the way the accounting process is set up. For example, someone could checks to themselves and then delete the invoices, or pad an invoice for goods and services that weren't provided to skim off the top.

Final Thoughts: Look for the Warning Signs, then Automate
On the operational level, there are precautions SMBs can take to limit fraud. There’s the obvious warning signs: shipping address is different than the billing; requests for immediate shipment; strange email addresses. SMBs should be on especially high alert during tax and holiday season.

In terms of fraud prevention, SMBs can go digital and implement security measures like two-factor authentication. Bill pay automation with tools like Roger helps SMBs easily manage their approval flow, and make sure that no invoice is paid unless a certain amount of approvers have approved the transaction via their personal device.

Regardless of a company’s approach to prevention, fraud is an ongoing, ever evolving threat that’s especially pernicious in the SMB world. It’s important that these organizations protect their hard work by raising fraud awareness and taking tangible precautionary measures.

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