With the recent Equifax breach it seems a good time to remind business owners how to keep their companies safe. I recently read an article at entrepreneur.com (full article here) that shared some important information. Here are some key points copied from that article.
Businesses frequently fall prey to fraud and identity theft because their leaders misunderstand the risks. Entrepreneurs mistakenly believe their small startups are too insignificant for thieves to target. But when it comes to identity theft, size doesn’t matter. As long as a company possesses customer data -- particularly financial information -- it holds value for scammers.
These misunderstandings aren’t limited to data breaches, however. Many leaders are under the delusion that debit cards are safer than credit cards, but scammers actually find debit cards much more attractive. Thieves can use debit cards to draw money directly from corporate accounts, whereas credit card companies are on the lookout for suspicious activity and able to step in before significant financial damage is done.
Entrepreneurs can take the following precautions to protect their companies:
1. Limit employee credit card use.
Widespread use of company credit cards increases the risk of identity theft. If you absolutely must have several cardholders in your company, issue cards exclusively to your leadership team or senior-level employees. Use only one card for all employee expenses, and give control of that card to someone in your accounting department. That person will be responsible for tracking use and monitoring statements for any red flags.
You might also consider asking employees to pay for work expenses using their own credit cards and then submit expense reports for reimbursement. This tactic minimizes the potential for identity theft and for exploitative use within the organization.
2. Switch to credit instead of debit.
Debit cards are far riskier than credit cards as they make it easy for thieves to steal money directly from bank accounts. Plus, people are much less likely to notice unauthorized transactions. Most employees are in the habit of using debit cards for small purchases, and fraudulent charges are more difficult to spot when they’re mixed in with 20 innocuous items.
3. Designate a transactions tracker.
The surest way to mitigate your risk of fraud is to regularly monitor all charges. Assign this task to a financial expert in your accounting department, and authorize him or her to investigate any suspicious expenses immediately.
Establish clear guidelines about the sort of expenditures employees can make at their own discretion.
By shoring up their organizational spending habits, entrepreneurs can shelter their companies from the raging storm of identity theft. Financial security should be a paramount concern for all business leaders, but that doesn't mean they should become overly risk-averse. Thoughtful spending strategies can prevent credit catastrophes and allow businesses to flourish.
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