Protecting your business from theft and fraud

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There are a number of risks that you’ll face in business – from employee theft to a competitor using your intellectual property. It’s your responsibility to safeguard your business from anything that may impact your survival and growth.

Risk Prevention

Like most things in business, prevention is the best cure – a little planning now could save you a significant financial cost in the future.   Review the following list of some of the common issues faced by businesses.


Staff theft and fraud

To safeguard yourself and your business from being affected by employee misconduct it’s important to take proactive steps to ensure opportunities for fraud are limited. A written policy of accountability and robust cash-handling systems will reduce the risk of theft or fraud.

Here are some examples of employee misconduct that could have a significant effect on your business:
  • Stealing products, or stealing and selling to others at a lower cost.
  • Stealing work time (such as an employee consistently leaving early, or wasting time at work and keeping other employees from getting their work done).
  • Excessive and unauthorized employee travel costs and expenses.
  • Employees filling up their personal car with gas using the company-issued fuel card.


Solutions to protect your business 

Here are some practical solutions to start safeguarding your business:
  • Outline specifically what’s considered theft in any employment agreements with staff and what is deemed misconduct. Taking one piece of photocopy paper home may be ok, but taking a ream of paper may not be.
  • Train your managers to spot theft – a vigilant manager is usually the first and immediate line of defence against employee misconduct.
  • Regardless of who it is (even a key employee) you must be seen to take action, otherwise you’re viewed  as condoning the action and it becomes an accepted practice.
  • Limit the number of employees assigned a business credit card set card spending limits.
  • Set up stock control software and systems to track all products in and out of inventory.
  • Require two people to sign products in and out of inventory management systems.
  • Remove cash handling by going online for all receipts and asking business customers to pay online.
  • Set up stock control software and systems to track all products in and out.
  • Deposit cash to your business account at least daily, if not more often depending on the amount of cash you carry.
  • Pay for expenses via a business credit card rather than using petty cash.


Customer payments fraud

Customer payments fraud is simply any kind of customer deception that leaves you paying for losses out of pocket.

Here are some threats to be aware of: 
  • Check fraud - A person commits fraud by writing several checks in a short period, knowing there are insufficient funds to cover all of them.
  • Credit card fraud - When someone illegally uses another individual’s credit card or uses a stolen card.
  • Counterfeiting - A person could attempt to pass counterfeit cash or counterfeit checks at your business. 



Here are some top tips for preventing customer payments fraud:
  • Perform credit and security checks on any credit you offer to other businesses, and don’t forget to check the debt history of the owners.
  • Only accept advance payments, or at least a deposit before commencing work to cover your material costs. If it’s possible and relevant, ask for progress payments on a regular basis so you’re being paid as you go.
  • Do not allow employees to sell to friends and family (who could be receiving large unauthorized discounts).
  • Educate your staff on common fraud techniques and how they can spot them. These include a customer having ‘forgot’ their photo ID so you cannot check their card details, or buying a small amount of product with cash (to trust them) then buying a large volume with a stolen credit card.
  • Allow only a select few employees to accept payments from customers, and regularly change these employees so it’s not the same person each time. 
  • If it’s relevant only accept electronic payments and do not accept checks (if bad checks are an issue for your type of business).


Theft of ideas or brand

As competitors come into the market, you may find people copying any success you’ve had. Make sure you have your intellectual property protected. You don’t want others to piggy back on your hard work. The main forms of intellectual property are:
  • Copyright – protection for original works of authorship, including literary, dramatic, musical, and artistic works.
  • Trademarks – protection for words, phrases, symbols or designs that identifies the source of the goods or services.
  • Patents – protection for inventions or discoveries .
For more information regarding protecting intellectual property, visit the United States Copyright Office or the United States Patent and Trademark Office.
Finally remember that you may have ‘trade secrets’ that you also want to protect such as the way you do business or customer budget cycles. In these cases protect this knowledge by ensuring it’s kept secret.


Theft of intellectual assets

Intellectual assets are things that you can’t always protect legally, as it’s too hard or too expensive. For example, it could be a relationship with a client, knowing customer buying cycles, or the time you’ve spent understanding the needs of your customers. This information is hard to protect but a valuable asset all the same.
Potential solutions:
  • Sign a Non-Disclosure Agreement with key clients to reduce the chance they will tell everyone how you do business.
  • Draft confidentiality agreements and restraint of trade clauses with staff to deter them from taking your trade secrets to a competitor if they leave.
  • Keep your best ideas to yourself.


Next Steps

  • Identify the key risks in your business.
  • Involve employees to detect any risks they may see.
  • Develop a plan to mitigate the key risks to reduce the chance of them happening.
  • Make sure implement these risk reduction tactics as part of your operating procedures.


Additional Resources


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