ID Theft vs. Fraud & How They Can Affect Your Business Finances

ID Theft vs. Fraud & How They Can Affect Your Business Finances

ID Theft vs. Fraud & How They Can Affect Your Business Finances

When you run a business, technology can make work much easier and more efficient. However, relying on the Internet can also open you up to certain risks–like identity theft and fraud. In order to avoid experiencing either of these potential threats, you should learn what they are, what makes you vulnerable to them, how to protect yourself, and what measures you can take once you think you’ve been a victim.

What is the Difference Between Identity Theft and Fraud?

Business identity theft happens when a criminal impersonates a business. This means that the person gains access to identifying information about the business, like its EIN, bank account information, and more. When criminals steal a business’ identity, they can impersonate the business and do things like take out loans, open new credit cards, and withdraw cash from bank accounts.

In contrast, fraud happens when an individual or business becomes a victim of some dishonest or illegal activity that is meant to benefit the perpetrator in some way. Fraud encompasses a wide range of crimes and activities, including embezzlement by an employee, non-delivery of merchandise from vendors, and more.

How Are You Vulnerable to Business Fraud and Identity Theft?

If your company is new and growing, there’s a chance you haven’t invested in sophisticated digital security to protect all of the information stored on your hard drives or networks. This leaves you susceptible to a potential attack, where hackers or criminals could gain access to your confidential and identifying information. Businesses also become vulnerable to fraud when they use credit cards to pay sellers or vendors they’re not necessarily familiar with, or when they haven’t gotten their internal security measures down pat (like password-protecting sensitive information even from non-essential employees or locking up confidential documents, etc.)

How Can Identity Theft or Fraud Affect Your Business Finances

If your business experiences identity theft or fraud, you could experience major financial stress or turmoil–particularly if money is stolen from business bank accounts or if you don’t receive income you’re expecting.

When you don’t have the cash you thought you had or you need to have, you may not be able to pay debts or vendors, make payroll, pay important taxes, and more. This could result in a business owner having to cover businesses personally, or it could force you to lay off employees or cut back on your production of a product or provision of a service. If the loss is too great, your business may even be forced to close.

Additionally, if your credit cards are used fraudulently (or credit cards are fraudulently taken out in your business’ name), it could impact your business credit score negatively. This could hurt your ability to form business partnerships in the future and stop you from increasing your revenue or taking advantage of new opportunities.

What happens if your customers are affected by identity theft or fraud?

If your business’ confidential information is accessed due to poor security measures on your part, you should take steps to protect your customers whose information may have also been compromised. First, write your customers and tell them their information may have been stolen. Next, ask them to notify the credit bureaus for assistance, since they can offer help about what to do next. Finally, let the police department know so they can look for the perpetrators.

Related: Click Fraud: How Can Your Business Fight It?

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