Running a business is already challenging enough with everything that goes on in the day-to-day operations. You have to ensure it’s running smoothly, between taking care of customer complaints and monitoring successful marketing campaigns. 

In business, one most unexpected occurrence that employers often overlook is fraud. Unfortunately, fraudulent practices are more common than you might think. In a 2018 report, U.S. businesses lose an average of 5% in gross revenue to fraud.

The most common types of business fraud involve anywhere from stolen money to illegitimate business transactions. To prepare yourself for every possible situation, here are the most common types of fraud to note.

1. Data Theft

Data theft or identity can cost your business thousands of dollars. Typically, data theft involves someone stealing your client information, credit cards and other personal information. Hackers can also have access to your information through your computer. 

To avoid data theft, keep your sensitive information secure. You can lock up physical copies in filing cabinets that only you can access. For digital files, be sure to use difficult log-ins and passwords. Avoid handing out your information to anyone unless it’s someone you trust.

2. Payroll Fraud

Payroll fraud can occur in several ways, including:

Employees lying about how many hours they workedFailing to repay pay advancesIssuing unauthorized bonusesIssuing unauthorized pay rate increasesCreating “ghost” employeesClocking time for co-workers who don’t show up to work

The best way to avoid this type of fraud is to run background checks on all new-hire candidates. Make sure to conduct an audit on the payroll as well. That way, you can catch any fraudulent behavior in the act.

A SaaS payroll service can help you approve payroll before employees receive payment. This software can also keep track of pay rates and hours when keeping an eye on things. 

3. Moving Fraud

Most moving companies are legitimate businesses and offer quality work. However, if you’re moving your business to a new location, moving fraud can sometimes happen. The most common types of moving fraud include:

Altering or publishing a fraudulent billProviding low estimates to lure you, then have you pay a significantly higher quoteWithholding your goods, then paying extra fees to receive more money in the processBumping weight costs by adding volume to the shipmentFalsifying material packing numbers and other provided supplies

To avoid moving company scams, make sure to request a binding estimate, so you know exactly how much you’re going to pay. Avoid hiring companies who don’t accept credit cards and never make cash payments.

Lastly, be prepared to do research to look out for any red flags, like unresolved customer disputes.

4. Fake Checks or Money Fraud

Fake check scams occur when someone overpays with a check and asks you to wire the extra money to a third party. Scammers will come up with any excuse for why they need to overpay. They could say they’re out of the country or require you to cover fees or taxes. Once the bank discovers the bad check, the scammer will already have the money, and you’ll have to repay the bank. To avoid check fraud, don’t wire money and consider accepting other forms of payment.

Money fraud happens when someone pays you with fake money. Counterfeit money comes in a high-valued bill, like $100. If you accept fake cash, you won’t receive any sales revenue.

Be sure to avoid this scam by looking for different features on the bill or using a money scanner. 

5. Return Fraud

If your business sells goods, then it’s likely you or someone you know experienced return fraud. Different types of return fraud include purchasing a product, using it, and returning it when nothing is wrong. Or, someone may attempt to steal your products then return them to profit. 

Either way, return fraud can damage your business. So, you’ll want to avoid this scam in any way that you can. 

At the time of return, make sure to ask the customer for a receipt. You can tighten up your store policy by having customers only receive store credit. Although, if you want to be sure you don’t receive a customer complaint, sometimes it’s best to give them the cash back—based on your judgment call.

Taking Care of Business

Business fraud can occur when it’s least expected. Keep learning about the different ways people will try to scam you. It’s important to be aware of these cases so that you can protect your business and its assets.