When it was first introduced, online banking was seen as a boon for small and medium-sized businesses. It saved business owners time, money and the stress of having to visit a bank branch to conduct transactions.
For that matter, cloud-based accounting software-as-a-service products that allow entrepreneurs to manage billing, bookkeeping and account balancing from anywhere they have an internet connection, have become just as important to the smooth functioning of a modern business.
And now with the rise of financial technology (or FinTech) service providers that manage online investment portfolios at a generally lower fee than traditional portfolio managers, entrepreneurs have the ability to manage business accounts, including business-related investments, without ever setting foot into a brick-and-mortar bank branch or the office of their investment advisor.
These digital innovations have revolutionized how business owners run their companies—often from the mobile device in their pocket.
But are these digital tools safe and secure for business owners who simply can’t afford to lose their hard-earned revenue to online fraud that could include hacking, phishing or other scams? The answer is a resounding ‘maybe’—if they’re managed properly and with the necessary security precautions.
We know that online fraud and hacking have become an increasing risk for Canadians. A 2013 report by Mountain View, Calif.-based online security firm Symantec Corporation found that cyber crimes cost Canadians $3 billion in 2012, more than twice as much as the year before.
The challenge for small and medium-sized business owners is unique. If you’re like most entrepreneurs, you don’t have a bookkeeper managing your day-to-day operations. Instead, you probably take all of your documents and receipts to your accountants once a year so they can prepare your financial statements and file corporate taxes. You likely pay relatively little attention to account transactions throughout the year.
That lack of oversight could pose a significant bottom-line risk to your organization.
Recently, for example, I had the opportunity to review the bank account of a small business. To my surprise, a cheque issued for approximately $7,000 cleared the bank twice and went unnoticed by the business owner. A follow up with the client revealed that the supplier used online banking to deposit the cheque by scanning it from a mobile device. Three months later, the cheque was also deposited through a bank teller.
Based on a follow up, the error was rectified by the bank but to date we don’t know the outcome of their investigation.
Of course, our recommendation isn’t to stop using online banking and other digital accounting or financial tools to manage your business. But as always, no matter what banking system you’re using—traditional or online—be sure to review your bank statements on a regular basis. Also, change your passwords at least monthly (and ensure they aren’t easily accessed or hacked) to protect your accounts.
Taking a few minutes each day to protect your company’s online financial presence could mean the difference between keeping your finances in the black, or watching your balance sink precipitously into the red thanks to common banking/accounting errors or online fraud.
Vazken Izakel, Partner