Cash Management · February 01, 2022

5 Types of Payment Fraud Business Owners Should Know

Payment fraud is a complex threat—one that can come from inside and outside your small business. To avoid the significant impact fraud can have on your business's health and viability, vigilance is key. A single instance of fraud can result in the loss of thousands of dollars—not to mention a degree of trust in your company by employees and customers.

Staying vigilant starts with educating yourself on what threats to look out for. Here are five common forms of payment fraud that business owners should know about, as well as some tips to help you protect your business against them.

1Business credit card fraud

If you issue business credit cards, you need to ensure every employee takes necessary precautions to appropriately protect and use them. The key is to set strict policies about what does and doesn't qualify as an approved charge.

Review business credit card statements as soon as they arrive. If you notice a charge that looks suspicious, check with the employee to see if there was a mistake on their part. If you believe the card was compromised, contact your bank as soon as possible to dispute the charges and close the account. The longer the card remains valid, the greater your risk will be of accruing additional fraudulent charges.

2Wire fraud

Another common type of fraud is illegal wire transfers. Criminals try to trick individuals into authorizing a wire transfer from a small-business bank account. They may pose as a customer or vendor to gather information that can help them gain access. Once they identify who can authorize a transfer, they'll send an email that looks like a legitimate request for funds. Wired funds are settled immediately, which means it can be difficult to recover them after you detect fraud.

Protect your business by verifying any payment requests from a vendor or customer that look unusual. Call the number you have on file rather than using any contact information included with the request. Also, limit the number of employees who have authority to approve or send wire transfers from your account.

3ACH fraud

Small businesses often use automated clearing house, or ACH, transfers. These can be a convenient way to pay bills and direct deposit an employee's salary. Unfortunately, they also can open up opportunities for ACH fraud. Hackers may try to obtain your banking information, often through an email phishing scam, and then use it to initiate payments online or over the phone.

To combat this type of fraud, have a special account used for issuing ACH transactions. Get to know your vendors and watch for any activity that seems unusual. Also, set limits on ACH transfer amounts, and review your accounts daily to identify potential fraud immediately.


Many of today's transactions are digital, but forgery can still happen. With this type of fraud, someone obtains a company check, makes it out to themselves or an accomplice, and forges the authorized signature. Companies often spot this type of fraud when a check that wasn't recorded in the accounting system is cashed.

Prevent forgery by keeping checks in a secure place and only accessible by authorized individuals. Also, match payees to bank statements to discover any suspicious activity.

5Invoice fraud

Finally, invoice fraud is another common scheme that can happen to small business owners. Criminals send false invoices that, at first look, appear to be legitimate charges from vendors for products or services. The hope is that the invoice will be paid without being questioned.

Protect yourself against this type of fraud by cross-referencing invoices with purchase orders and contracts. You can also request that the vendor provide the name of the authorizing agent from your business. Also, be leery of anyone who asks for quick payment outside of your standard invoice terms.

Stay alert

Criminals often target successful small businesses because their owners are juggling several responsibilities and may overlook the charge. You work hard to earn your money and you should keep it. You can help protect your business from fraud by paying close attention to all financial transactions. Implementing strong fraud detection solutions can also go a long way toward helping you stay vigilant against these threats.


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This information is provided for educational purposes only and should not be relied on or interpreted as accounting, financial planning, investment, legal or tax advice. First Citizens Bank (or its affiliates) neither endorses nor guarantees this information, and encourages you to consult a professional for advice applicable to your specific situation.

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