How successful companies fight business financial fraud

The most successful small and midsized businesses (SMBs) — resilient companies that can best withstand economic disruptions — have one thing in common: a commitment to safeguard their organizations against business financial fraud.

According to a recent Citizens' survey¹, close to seven in 10 of the most resilient SMBs say business financial fraud protection is a top priority. That is 10% higher than the number of less resilient companies with the same level of focus. This vigilance is one of the factors driving the success of these companies. Sixty-eight percent of resilient businesses in the survey project double-digit growth in the next year, 50% higher than expected growth among non-resilient businesses.

"Business financial fraud incidents are on the rise, and many of the most successful companies are taking steps to protect themselves," says Mark Williams, Head of Business Banking Treasury Sales at Citizens. "When businesses demonstrate that they are focused on this prevention, they gain a sales advantage. And, deterring business financial fraud protects cash flow."

Avoiding business financial fraud is also good for managing expenses, since breaches consume both time and money to repair damage to operations and reputation. The Association of Certified Fraud Examiners¹ estimates that organizations lose an average of five percent of their revenue to fraud each year.

6 tools to mitigate financial fraud

So how do resilient organizations help keep business financial fraud at bay? In addition to using anti-virus software and business credit cards, the most resilient SMBs use the following six tools in greater numbers than other companies to fight fraud and drive success.

1. Cash management tools. Access to an all-in-one cash management platform gives businesses easy insight into real-time data. This means they can save time by automatically confirming that all account activity is accurate and then use that information to make informed business decisions. Resilient businesses recognize the importance of using data insight to manage cash flow and are twice as likely as other companies to use a consolidated cash management tool on one platform. Even the smallest resilient companies in our survey say they are "extremely effective" at analyzing financial data.
2. Electronic receivables. Electronic check deposit reduces the risk of fraud and speeds collections. Businesses can view digital images of deposited checks and use a Positive Pay application to quickly verify authenticity and accuracy of payments. Resilient SMBs of all sizes are two times more likely than less resilient businesses to use electronic receivables.
3. Digital person-to-person (P2P) payments. Enabling customers to use tools such as Apple Pay™ or Google Pay™ gives them a fast, easy, and secure way to pay. All transactions are encrypted, with credit card numbers being replaced by randomly generated tokens. Machine learning further improves security by providing automated notifications of unusual deviations from normal transaction behavior, to help spot fraud.
4. Digital point of sale (POS). Digital POS systems keep data secure by encrypting data at every stage of the transaction, including at the card reader, your network, the cloud, and your payments processor. These tools also help your business stay compliant with Payment Card Industry Data Security Standards (PCI DSS).
5. Online invoicing. Electronic invoicing gives customers a secure way to easily pay their bills and helps businesses automate the way they track all account activity. It also helps businesses get paid faster, speeds up collections, and avoid check fraud schemes such as check washing, where criminals steal paper checks from mailboxes and alter the payee and amount before attempting to cash them. This tracking of information also provides essential insight into business data that is key for citing business financial fraud and for making informed decisions. Resilient companies with $500,000 to $5 million in annual revenue are more likely than other SMBs to use online invoicing and bill payment.
6. Electronic bill payment. Electronic disbursement options such as lockbox networks, ACH, EDI, and wire transfers offer secure and efficient options for sending funds, minimizing errors, and reducing fraud. Even the smallest resilient SMBs use more electronic bill payment tools than companies that are less resilient.

Check out these business fraud resources or schedule time with a Citizens Business Banker to discuss ways you can protect against financial fraud.