Savvy small business owners are well aware of the benefits of establishing solid business credit scores and ratings, and many are actively engaged in making sure their business credit file isn’t tarnished by missed payments, reporting errors, or other credit mishaps.

Of course, making sure timely payments are reported to corporate credit bureaus isn’t the only benefit that can come from monitoring one’s business credit file. Keeping a close eye on the information contained in a business credit report may alert you to suspicious transactions indicative of fraud. For this reason, business credit monitoring can be a valuable risk management tool to help guard against unscrupulous characters, whether they’re strangers or trusted employees.

Small Businesses and Fraud

According to a 2016 report by the Association of Certified Fraud Examiners, the median losses from occupational fraud (theft committed by employees) were the same for small and large organizations: $150,000. However, fraud can be especially disastrous for small business owners. Many private companies lack the resources to recoup losses, and they may face an uphill battle to get back on the road to success.

The median loss from theft committed by employees is $150,000. Help protect your small business from fraud with business credit Tweet This

While small business owners may think their companies are less visible than major corporations, they can be attractive targets because many lack sophisticated fraud detection tools or policies. Criminals tend to be opportunistic, and complacency can be extremely expensive for a business.

Types of Business Fraud

Businesses can be affected by different types of fraud, from email phishing schemes to internal misappropriation of funds. The telltale signs of business fraud can be difficult to detect, especially if it’s being committed by clever cyber-criminals or employees. That’s why monitoring one’s business credit file can be so crucial from a fraud-prevention standpoint.

Let’s say that in the course of reviewing your business credit file you find that several of your vendors are reporting that they have not been paid for more than 60 days. This surprises you because your bookkeeper assured you all accounts were current. Investigating this discrepancy could help you catch errors or outright fraud before it becomes even more damaging.

To give another example, a review of a business credit report might reveal activity on credit cards that you aren’t using. This could be the result of a phishing scam, in which a third party gains access to financial accounts by tricking unwary business owners into submitting their banking credentials to seemingly legitimate websites. If left unchecked, these fraudsters could gain access to other accounts as well, or even open new ones under the business’s name.

Multiple unexpected negative entries on a business’s credit report could be an indication that fraud is occurring. If unscrupulous employees are responsible for handling outgoing payments, accounting, and record-keeping, it may be possible that they’ve misappropriated these payments for personal gain. They may have diverted correspondence intended to rectify the situation from ever reaching the business owner.

Depending on the leniency of the vendors’ credit policies or a lack of attention to detail on their part, this type of fraud could go on for months, eventually leaving your business with a crippling debt burden. It may be difficult to win new contracts with a business credit file that has been damaged by missed payments or defaults, starving a small company of the ability to fund its recovery.

While business credit monitoring can’t prevent these things from happening, it may help serve as an early warning system against criminal behavior.

Business Credit Monitoring Tools

Dun & Bradstreet offers a range of products to help businesses monitor their credit scores and ratings. CreditSignal® alerts you to changes to the scores and ratings in your business credit file*, which can help tip you off to both positive and negative developments. Best of all, it’s free to use. However, CreditSignal offers a limited illustration of what may be going on in your business credit file.

CreditBuilder™ provides unlimited access to your D&B® credit scores and ratings, allowing you to stay on top of new developments. You’ll get a detailed look at your business credit file, which may allow you to uncover suspicious activity before it does severe damage to your finances. You can also submit trade references** through this product.

You can compare all of D&B’s business credit monitoring solutions online.

How Else Can I Prevent Business Fraud?

There are several ways to help make your business less vulnerable to fraud. Every business should take time to educate its employees about protecting company and customer information. Make sure that your computer network is guarded by anti-virus and anti-malware software. Run background checks on new employees. You can’t completely insulate your company from the risk of fraud, but you can make it more difficult for criminals to get what they want.

Many businesses are reluctant to prosecute employees suspected of fraud. They may be embarrassed and not want business partners and customers to know about the deception. However, reporting business fraud to authorities may keep another company from being harmed by the same person in the future.

Photo Credit: gal0611, Twenty20