Reducing your Risk from Fraud Using Xero – Top Tips

Reading Time: 3 minutes

Fraud has reached epidemic levels in the UK and should be seen as a national security issue, says a recent report by think tank the Royal United Services Institute (RUSI). The Crime Survey for England and Wales f

Fraud has reached epidemic levels in the UK and should be seen as a national security issue, says a recent report by think tank the Royal United Services Institute (RUSI). The Crime Survey for England and Wales found 3.7 million reported incidents (to March 2020) of members of the public being targeted by credit cards, identity, and cyber-fraud. The scale of credit card, identity and cyber-fraud make it the most prevalent crime, costing up to £190bn a year.

Small businesses with fewer than 100 employees reported 28% of all instances of fraud – a higher rate than for medium and large businesses – and suffered greater losses in relation to their size.

The types of fraud that you need to be aware of fall into three main categories:

  • Theft
  • Financial statement fraud
  • Asset misuse

In this post, we share tips to help protect your eCommerce business from fraud using Xero accounting software, including:

Risk of Fraud

Businesses need to secure their data when utilising online services so that your data will remain secure and account email addresses and passwords will not be at risk.

Implications of Fraud

Given the current increase of phishing scams employed in the cyber world, security is becoming a genuine concern for businesses. If you became a victim of fraud and your details were stolen, you could suffer significant losses. Firstly, your login details could be changed. Secondly, bank details could be deployed with payment instructions altered to move money from your client’s accounts to the fraudster’s account instead. This type of fraud is becoming a risk to many businesses, and hence you need to take the following steps to protect your business.

Accounting software to the rescue

The processing of purchase invoices is susceptible to fraud. Purchase invoices are often manually checked, and the busier the finance department, the more likely errors are to occur. Some criminals rely on this to submit fake invoices for goods and services never supplied, often for small amounts hoping their cost will slip under the radar and be paid without any approval process.

However, with the introduction of artificial intelligence and automation, we see significant changes in how invoices are checked and processed. Cloud-based invoice management uses this technology to considerably reduce the risks of invoice fraud. Automated invoice processing scans submitted invoice attachments, mining and digitising all relevant information. It then matches the invoices with known or approved suppliers in the system and submits them for approval. Typically, 90% of invoices can be dealt with in this way, the remaining 10% being set aside for manual processing or additional scrutiny.

Suitable systems can be integrated with the user’s cloud accounting software, creating an audit trail. The AI element analyses the data and flags up any irregularities, such as:

  • Unusual invoicing patterns
  • Unexpectedly large sums
  • Spikes in a supplier’s invoice frequency
  • Unmatched or duplicate information
  • Approval of invoices by staff at an inappropriate level of seniority.

Xero’s Two-Step Authentication Process

You need to ensure that you mitigate your chances of fraud by setting up Xero’s Two-Step Authentication Process. This will give your business an added layer of security and negates the chances of your Xero account falling into the hands of phishing and malware fraudsters. This Two-step process will occur each time you log in to Xero with a unique code generated via the Google Authenticator App on your smartphone. This can be successfully achieved through access to your Xero account code from your smartphone.

Step 1 – Login with usual passwords

Log in to Xero with your usual username and password.

Step 2 – Login with second unique code

Log in with your second unique six-digit code generated by the Google Authenticator app on your personal Smartphone. If you do not have access to your phone, then you can answer security questions that you enabled when setting up the Two-Step authentication process instead.

Fraud prevention starts with a conversation

Small business owners consistently underestimate the threat of fraud – yet studies show they face the greatest risk.

Fusion Accountants are Xero Platinum Partners and are available to answer any questions that you may have regarding the setup of Xero’s Two-Step Authentication Process. Please call us on 020 8577 0200 and our expert team will assist you.