Security researcher Ponemon Institute released its list of the "Top 20 Most Trusted Companies for Privacy", based on a survey of 6,627 US adults. Some 38,000 individual companies got mentioned, 229 of which were ranked more than 20 times. American Express was top of the list, followed by IBM, Johnson & Johnson, HP, and eBay.

No small businesses actually made the Top 20 – could it be because 56 percent of small businesses don't even have a privacy policy on their Web sites? – but the Ponemon results still provide a useful lesson. Facebook, for example, made the list last year but not the current one – which comes as no surprise, as 2009 saw the site face serious security breaches as well as a very public debate about their privacy policies.

Said Larry Ponemon, the Michigan-based institute's chairman and founder, in the report:  "Facebook draws a great deal of attention because they have chosen to innovate on the issue of privacy in a highly visible manner, and while they were rewarded for their efforts last year, consumer were less kind to them this year, showing just how important privacy protection is as a brand asset."

Mike Spinney, a Ponemon senior privacy analyst, thinks Facebook may return to this list. On his blog he praised the company's "transparent approach to privacy" and "typical responsiveness to public comment," saying he believed it would serve the company well in the long run. (What other movement was there in the Top 20? Besides Facebook, AOL and eLoan dropped off the list. Four not listed the previous year who made the cut this year: Google, Weight Watchers, Walmart and AT&T.

The study also found that consumers' feeling of control of their personal information is dropping steadily: 41 percent in 2010, down from 45 percent in 2009, which was down from 56 percent in 2006, the first year the study was conducted.

A top area of concern for those surveyed: Identity theft. Nearly 60 percent of those surveyed rated the subject a major factor in how much they trust a brand. Other threats to brand trust: Abuse of civil liberties and annoying "background chatter" in public venues. Translation: Lay off the unnecessary Twitter and Facebook updates.

How can you help encourage trust? Sixty percent of those surveyed said "substantial" security protections were a huge plus, while 53 percent gave great weight to accurate data collection and use. Ponemon cautions that the latter also includes marketing. You should gather all the information you can from customers, but be careful what you do with it.

"Any time customers receive marketing that's irrelevant or annoying, it's a privacy issue to them," Ponemon said.

Not surprisingly, Fran Maier, CEO of TrustE, which monitors online privacy practices, advocates a sturdy privacy policy – a survey done for the company last year revealed that of the less than half of small businesses who actually had a policy, a third had just cut and pasted it from elsewhere. (Looking for some help crafting yours? Click here.)

Niceties that may be overlooked – such as privacy – she says "are the very elements that give small businesses an edge over their competitors. Especially in times of economic downturn, a good brand reputation is something small businesses should not jeopardize."

What do you think? Does your business have a written privacy policy? And do you think Facebook's new policies are cause for alarm?

Online ads that adjust to you. We've written before about the slightly creepy but cool trend in online advertising that is behavioral targeting, which allows websites to display ads to customers who, for instance, abandon their shopping carts. Now, Stephanie Clifford of the New York Times looks at something new: a start-up that allows companies to buy and customize online advertisements in a matter of milliseconds. The company, AppNexus, uses information collected about a given web user's purchasing and search history to make real-time decisions about which ads will perform best. Clifford reports that eBay is trying the system out, and that it's returning three times as much money as it costs. "Previously eBay had to buy a block of ads from a network or exchange, and when someone it recognized showed up, they could partially customize the ad," she writes. "Now, customers are offered one by one, and eBay--using AppNexus's automated system--only bids on the ones it thinks are worthwhile."

Did Mark Zuckerberg commit a felony? Last week, Business Insider broke the story (supported by more than a dozen sources) that early in Facebook's history, Mark Zuckerberg, then a 19-year-old Harvard student, used Facebook members's information to break into their private e-mail accounts, hack a competitor's site, and alter users profiles. Now, BI has interviewed privacy lawyers who say those actions from 2004 could be considered felonies under state and Federal law. It's a troubling development for a company that has access to the private data of some 400 million people.

How to advertise green products legally. It's no secret that making your product a little more green can also add some green to your profits. But it's important to make environmentally claims legally. The Federal Trade Commission has already gone after Kmart, Tender Corp., and Dyna-E international for making false claims of "biodegradability." There have also been class-action law suites against companies like S.C. Johnson & Son, which added its own "Greenlist" seal to its Windex products that misled consumers into believing that a third party had certified the product independently. The FTC has a guide for the use of environmental marketing claims. An updated version is expected later this year, but in the meantime smart marketers should follow these tips from Advertising Age to avoid dishonest labeling.

Foursquare grows by leaps and bounds. Foursquare, the location-based social network/game just celebrated it's first birthday and it has been experiencing wild growth for the occasion. The site surpassed its own record of 275,000 check-ins in a day. TechCrunch contextualizes this milestone, explaining that the company had 1.2 million check-ins in a week just a month ago and half as many a month before that. Both Foursquare and it's top competitor, Gowalla, are gearing up for SXSW and TechCrunch writes that "both are absolutely on fire right now and could go nuclear this weekend." So stop procrastinating and get your business on Foursquare.

Homes of the next big things. Earlier this week, The Wall Street Journal and VentureSource teamed up to identify the top 50 venture-backed companies with the best chance to become "the next big thing"--a list that included HomeAway, Fusion-io, and Etsy. This morning, The Journal took a look at where these companies are located. Not surprisingly, just about half call Silicon Valley home. But New York City was well-represented, too.

Aside from LinkedIn, some IT workers use Slashdot.org for up-to-date “news for nerds” or IT Toolbox to keep in touch with other professionals.

I just spoke Monday at the Atlanta PMI about Web2.0 and how it affects project managers, the summary of which is that it raises expectations on UI, adds stakeholders, and steals control from IT (part of a continuing trend).

Curt Finch is the founder & CEO of a resource management software company.

Kathryn Amenta, a San Francisco-based financial advisor, suggests that an accountant with a regular monthly relationship with your company can help streamline the process by advising you on time-saving methods – and they can catch costly errors. Moreover, they'll have your future financial health in mind. "That person can also help craft a plan for going forward, say, a two-year plan," Amenta says. "It's really important to look at: What is this business paying too much for? Is this business venture supporting itself?"

A part-time CFO can step in if your needs are more strategic in nature, or if you are setting up the business to scale. "They are people who have reputable business and finance training and now make business their livelihood," Amenta says. "They have a number of clients, and can come in once a month to oversee what's going on financially."  Dig Deeper: Renting a CFOStreamlining Accounts Payable: Avoid FraudIf you've never paid a double check, a fraudulent bill, or experienced some level of employee embezzlement, consider yourself lucky. Accounts payable is a flashpoint for fraud in many companies, large and small. To avoid fraud, you can institute a variety of checks and balances. One simple method is to separate duties. A junior employee can process and print a check, but a senior one – maybe even you – should be required to review and sign it. This dual duty can be incorporated into most basic business accounting software, so employees can only access and perform assigned functions. For checks that exceed a predetermined amount, requiring a second signature – either from you or your CFO – is a best practice. Separating the process of adding a new supplier to your system from the ability to issue payment is also advised.

If your company incorporates employee expenses into your accounts payable system, you might insist that employees use a business credit card – one per employee – for paying and filing expenses.  "Fraudulent cash purchases are fairly rampant in companies of any size," says David Barrett, CEO of Expensify. "With software that uploads data directly from your card account, you can't report the same expense twice."Dig Deeper: Catching Costly Errors

Streamlining Accounts Payable: Assess Your WeaknessesOnce you're accustomed to your accounts payable system, you'll naturally start to see trends. Notice when the most spending occurs for your business. What categories of spending vary from month to month? When do you rely most heavily on suppliers' credit? For retail companies, the holidays are a time of tremendous inequity of accounts payable and accounts receivable. The goal is to be financially prepared for times of big spending that come in advance of payments received, but when that doesn't happen, there are a couple of simple things you can do to maintain your relationships that might come under stress.Amenta advises clients to be proactive. Be honest with your suppliers about when, if not within the payment window, they can expect to receive a payment. "I believe they should act quickly. Pick up the phone, call creditors and let them know what's going on," she says. "Be clear. Say 'I'm going to pay this much this month, and this much next month, even if it's just a token amount so they know you are on it."Second, thank your suppliers for their flexibility and remind them about your prompt previous payments. If they become hostile about not being paid, offer references to your long-term financial stability, or even last year's balance sheets to prove you've got the means on the way.Dig Deeper: Keeping Track of Crunch TimesStreamlining Accounts Payable: Simplify AuditingIf you're transitioning to a new accounting software, accountant, or part-time CFO, tax-time can be tough. That's because auditors focus on invoices, expense reports, and your own payable list to record annually your expenses. It's best to make a transition to a more streamlined accounts payable system at the start of your fiscal year. If that's not going to be the case, ask your accountant to help you ease the transition from the start, by inputting the rest of the year's previous data into your new system. Working with the same accountant throughout the year and through reporting your taxes is the best way to streamline the process. If that's not possible, you'll want to make sure you have documentation to support your own accounting of payments, including transaction confirmation from your suppliers.Dig Deeper: Best Practices for Accounts Payable

Dig Deeper: More News on Apple's iPhoneMaking Money on iPhone Apps: Getting ApprovedIn a market where everyone wants in on the action, as an app creator, you have two big hurdles. The first is creating an app worthy of a favorable review upon submission to the Apple iTunes App Store. The second is promoting your app so that it breaks through the pack and sells well. Though there's a lot of negative hype concerning the first hurdle, developers generally say that getting their app approved isn't the struggle it's made out to be. Apple's standards for apps do restrict some racy and pornographic content, and the company excludes apps that, in its view, do not enhance the iPhone experience or that duplicate existing iPhone features. When it comes to fresh, inventive content, however, most apps are readily approved.Zach Saul, founder of Retronyms, a San Francisco-based app creating company, has been creating apps since the 2008 iTunes App Store launch, in which his popular, 99-cent app Recorder – an audio recorder – was included. "We haven't had any trouble getting apps approved and included, but our work is very non-controversial, entertaining and fun," he says. "The approval process seems like a confrontational thing, but every time we've had an app rejected, there's been something wrong with it and they've given us a bit of free testing and helped us solve a problem, so it's very helpful."And despite the fact that thousands of apps are submitted to Apple for approval each week, app creators tell Inc.com that the turnaround time tends to be swift."It actually wasn't that bad a process," says Trefry, who learned that Gigaputt was given the thumbs' up after a three-day wait. "You just have to do your contract with them, and it's pretty clear."

Dig Deeper: What's New at the App Store

Making Money on iPhone Apps: Promoting Your App

After an app has been approved and is listed for sale in the iTunes App Store, your next goal is to get customers to download it. To some extent, this process becomes a chicken-and-egg scenario. Vaulting into a top-selling category is the best way to encourage sales – but you first must have sales to rank highly within a category. Fortunately, the process of gaining exposure isn't completely out of your hands. Apple features new apps daily.What does it take to win over Apple's support? Good design is important. "As far as we can tell that's based on polish and quality," Saul says. "Make something that's useful and also is nice and polished and looks good, and your chances are vastly increased."

Looking good is a matter of solid design. Enlist a designer to help create the interface a user will experience, as well as the logos and screen shots that will appear on the Apple iTunes App Store. This collateral is the first thing a potential buyer will see, so maximizing its impact is crucial.Besides design, being polished includes being technically solid. If you are developing the app yourself, you may want to consider bringing on a programmer who is well-versed in Objective-C to help you; though apps can be built using other programming languages, this version of C++ is the standard. You should also be sure to give your app the full battery of beta-testing it needs before you make your submission. An inexpensive way to test it is to distribute it among friends and solicit feedback. Just remember: Without smooth functionality, your app will be dead in the water.Dig Deeper: The Rush to Develop iPhone AppsMaking Money on iPhone Apps: Leveraging Your Existing Business

If you already have a business, creating an app – or multiple apps – to enhance your clients' experience can be a tremendous opportunity. Often, a small business is already filling a niche – and can also do so when their client is on the move. Take the case of Yelp, the online review site. Its iPhone app not only provides its standard customer-reviews, but also can tap into GPS to allow a user to find nearby businesses. So, thinking along the lines of "what do we already do, and how can it be used on the go?" is a great place to start. Look for an area that will be a natural extension, or a macro view of what you do.When Zillow, a real-estate listing company, built an app, for example, it not only included its standard real-estate listings, but also allowed users to scope out rentals and homes for sale in their immediate geographic area. This feature tapped into casual consumers' desires to learn, say, what their neighbor's condo might be worth – or to take a self-guided real-estate tour. It took off, and now Zillow is selling mobile ads and incorporating social network link-posting – in other words, running a quite profitable app.Dig Deeper: Should you Make an iPhone App?Making Money on iPhone Apps: Think Big or Think TinySome of the most successful apps are the most complex: Location-aware, social-networking-capable apps such as Whrrl, FourSquare or Glympse. And some of the most successful apps are very simple, one-off jokes. It may be that the best app for you is limited in scope.Simple apps, the kind people whip out at parties to emulate chugging a beer (iBeer) or wielding a light saber (Lightsaber Unleashed), require far less up-front time designing and programming. And if you haven't invested a lot of time into developing a simple app, you can afford to make it inexpensive. In a best-case scenario, with minimal marketing such apps can to go socially viral. Then again, if it doesn't sell, no biggie: just try again. On the opposite end of the spectrum, complex, multi-faceted apps are born most often out of an existing business or business model, and can require a team of designers working for weeks or months. This model is best for existing websites and businesses that can add value through creating an app. With these, you're going for polish, perfection, and possibly a higher price-point. What's more, complex apps need to be sticky to be effective. That's where marketing comes in.

In the middle ground stand a host of simple-concept games with great graphical interfaces. If you look at the App Store's top 10 sellers for paid apps at any given time, most of them are games. Games that either educate or temporarily amuse, especially ones that anyone from age 4 to an adult can understand and appreciate, are almost always in demand.

Dig Deeper: A Guide to Multimedia MarketingMaking Money on iPhone Apps: Flaunt What You've GotOnce your shiny new app is available in the App Store marketplace, visibility is vital to profitability. Getting into the App Store's top 100 – much less top 10 – list is of course the best way to see sales soar. If that's just not happening for you, start small. Build an audience from the ground-up. "It's not necessarily the day that comes out that it needs to have blockbuster sales," Trefry says. "Think about what audience you're going after, and how that person interacts with their device."Some key tips: • Generate pre-release buzz. Have a website up and running before your app even launches. Make sure information is available for any interested parties. Existing social networking you or your company use can be beneficial in generating buzz, too.• Do your own marketing, or enlist help. Craft a press release, or have all relevant information, including your contact info, available online. Create a list of blogs and websites that might be interested in reviewing your app, and ping them to spark interest. Be casual but informative – confident but never pushy. If being your own PR person sounds like a drag, enlist a tech PR firm that specializes in product releases on a contract basis.• Plan for tie-ins or cross-app promotion. If you have existing apps, building in promotions for a new product is a simple way to get its name out to customers who already like your work. In-game advertising isn't a quick-fix to boost sales, though; it's more of a way to create a longer tail for your product's sales. Separately, think about other companies who aren't direct competitors you could form a mutually beneficial relationship with once you launch.• Create an infrastructure that will support momentum and future growth. Consider what will keep customers coming back as well as what will attract new ones. Are there promotional tie-ins or giveaways that can help attract new interest on your website and in the App Store? What level of connectivity with buyers are you expecting and can you maintain? Trefry stays in touch with his app's fans on Twitter and Facebook, and since hearing input from them modified Gigaputt for use on the iPod Touch. "From social games on Facebook to iPhone games, there's no longer the old-school concept of putting it out there and then it's done," he says. "Now it's all about interacting with your fans, and making appropriate updates based on feedback."Dig Deeper: iPhone Apps for Small BusinessMaking Money on iPhone Apps: Entering a Contest or Get in a FestivalThis year, New York City invited programmers and developers to dig through their data and create urban apps. Offering $20,000 in prizes, the city hoped to spur technological innovation. For app developers, though, it was a big chance not just for a cash prize, but for exposure. When the prize winners were announced, everyone from politicians to venture capitalists were there taking note.If you're a member of a tech or academic community, speaking on a panel or holding events in which you can discuss innovation in your field (and in your app) can hone in on your ideal audience. As a bonus, you'll gain clout in the community, and possibly open yourself up to future business opportunities. For example, Saul debuted Retronyms' iPhone game Seek 'n Spell at a New York big-games festival, where he introduced dozens of gamers to his location-based competitive spelling game. This year, he is speaking on a SXSW panel, and regularly hosts meet-up events to play Seek n Spell in San Francisco. "Even just talking about the market and space we're working in gets people excited and creates a market where new people will buy the app," Saul says.Dig Deeper: Even a Kid Can Make an AppMaking Money on iPhone Apps: Additional ResourcesCheck out 31 example apps to get your ideas flowing at appsamuck.com. See a fairly exhaustive guide to making an iPhone app in one month.Check out the O'Reilly guide Building iPhone Apps with HTML, CSS, and JavaScript: Making App Store Apps Without Objective-C or Cocoa by Jonathan Stark, 2010. iPhone Application Development For Dummies by Neal Goldstein, 2009.The Business of iPhone App Development: Making and Marketing Apps that Succeed by David Wooldridge and Michael Schneider. Apress, 2010.Inc.com's additional coverage of the iPhone and app development.

The question is; why would you?

The other Apple headline is, like most Apple headlines, unofficial. According to Apple Insider, Apple will be releasing the latest version of iPhone software this summer (iPhone 4.0) and Glory Bee, it will finally make multi-tasking possible.

I'm not a midwesterner. I don't even play one on TV. However, I am a soul of practicality. Believe me, this second announcement is far more important than the first. Who cares about being the earliest of early adopters to pull the trigger on a bling bling product that no one really needs? (I'm sure someone is going to have something to say about that, so just bring it on.)

On the other hand, there are how many iPhone users out there already? (answer: gazillions!). Now, here is some news that is going to make what they have infinitely more useful.

The question is have the whiz kids at Apple pulled it off?

One of the things that makes Apple so secure is that it runs one open app at a time. It doesn't allow rogue spyware, etc. running in the background that you don't know about it.

So, how is Apple resolving that one?

The other biggie? What does this mean for battery life? The more programs running, the more life getting sucked out the battery.

Will this be a Pyrrhic victory, after all?

You should also make sure there is a way to print invoices in hard copy. Although bills can be sent by e-mail,  some of your clients may prefer receiving a hard copy of a bill. You can choose to use an automated service, such as billing handled by FreshBooks, or you can task an administrative employee with printing and mailing hard copies of your invoices.Next, you must decide who will handle billing. Kathryn Amenta, a San Francisco-based financial advisor, suggests you handle it at least for a time. "I would recommend a business owner understand their finances fully before they turn it over to someone else to handle," she says. "It's super important as an owner to have a finger on the financial pulse. That's the bottom line – that's why you're in business."Dig Deeper: Tending to the Business of Collecting MoneySetting Up Accounts Receivable: Invoice Schedules and Other GuidelinesThe structure of accounts receivable bookkeeping can vary tremendously depending on your client base and service or product type. But whether your billing is going to be consistent from month to month or includes a new client list every week, you'll want to back up a step. Before taking on a new client, present to them the terms of the transaction. This can be a payment policy on your sales-based website, or a cluase included in the formal contractual agreement signed by both parties before the start of your service – or something in-between. The important thing, experts say, is to put the terms of payment in writing. For example, a terms-of-sale agreement should always include is payment schedule. To determine a payment time-framethat will be reasonable for both you and your clients, consider industry standards as well as what your business needs to maintain steady cash flow. Say you decide 30 days is a reasonable expectation. Not only include that fact in your agreement, but prepare to include pay-by dates on future invoices. Consistency is crucial in maintaining clients' respect and trust.Additionally, you'll want to establish guidelines for how much credit you're willing to offer to clients. It may be no more than a basic formula that leaves room for you to be  flexible about clients' payment schedules. One question that might be helpful to ask in deciding a credit policy is: How long should a client be a reliable business partner before you put yourself at risk? Another: Do you want to treat large corporations and small companies differently? Dig Deeper: How to Create a Smart Credit PolicySetting Up Accounts Receivable: Mastering the Invoice

Once your clients clearly understand the terms of payment, it's time to create the invoice. Every invoice should include the following:

• The product or service (listed by number of hours worked or by project) sold.

• A breakdown of expenses involved (if relevant).

• The amount due.

• The due date.

Your invoice should be a clean, straightforward document that features your company logo. It is common to offer a percentage discount – however tiny – for prompt payments. Some small businesses also offer a tangible reward to clients who don't fall overdue – say, a gift certificate, future discount on your services, or tickets to a sporting event.

The complex psychology of invoicing also dictates that you would be smart to exhibit certain element of grace, according to Mitch Solway, the vice president of sales and marketing at online bookkeeping and invoicing company FreshBooks, which has recently studied its customers best practices in accounts receivable.

"One of the best pieces of advice we’ve uncovered in recent months is to think carefully about the actual wording on the terms you apply on your invoices," Solway says. "Being polite and asking for payment within 21 days seems to get our customers paid a lot faster than terms such as 'due on receipt' or 'due immediately.'"In other words, treating customers in a human way can actually create good-will and speed up payment. Dig Deeper: Collections in a Tough EconomySetting Up Accounts Receivable: Drafting a Collections PolicyEven for businesses with all the best accounts receivable practices in place, some clients never seem to keep up with payments. In general, you want to give these late payers the benefit of the doubt – but you also need to stay true to your business's bottom line. Setting up a clear collections policy at the outset of establishing an accounts receivable system is the best way to lay a groundwork for collecting overdue amounts.

Amenta suggests being kind but not meek in the process – after all, your clients should know what to expect if you’ve already laid out their payment process at your relationship's outset. "It's definitely necessary to have a follow-up plan for overdues," she says. "Is it going to be a phone call? Is it going to be a series of emails or a hand-written note?"You'll want to be establishing a timeline of steps to take on collecting – say, first a call, then a note a week later, then a call daily until your debtor has established with you his or her ability to pay. Consider how much flexibility you can offer to a client in a dire situation. Amenta suggests allowing good clients an opportunity to establish a payment plan. But if you're in real doubt over whether a client has the ability to pay, after you've given them an extended payment window, it's okay to ask for assurance. Asking for references who have found the client reliable even in tough financial times is one option; another is asking for past balance sheets so you can analyze whether there's a seasonal cash flow issue for the company.

If you're anticipating some collections will present real trouble for your business in the future, take some time early on to research your state's collections laws, so that you will know what your steps must be before taking a seriously overdue debtor to small claims court. For information and commercial lawyer referrals, check out the Commercial Bar Directory.

Dig Deeper: How Much are You Actually Lending Your Customers?Setting Up Accounts Receivable: Knowing When To Enlist Outside HelpFrom the beginning to the end of establishing a quality accounts receivable system, there are some circumstances under which you might want to employ a bit of assistance. 1. System Set-up. While most experts agree that you, as a small business owner, need to keep your eyes on the bookkeeping at all times, it is often wise to bring in outside help when you're implementing a new software system. 2. Establishing Credit for Customers. If large clients do not want to pay at the outset of a service or transaction, or in a proscribed period thereafter, you'll want to enlist a Credit Bureau service or credit-rating agency to review the credit of customers, so they can get a green light to spend with you—and you can have peace of mind in serving them. The fee is typically $1,000 per every 100 credit checks. If you're working with an number of high-cost new clients, working with a credit agency can be worthwhile to avoid trouble.3. Collecting Overdue Accounts. After you've implemented your collection plan, including multiple conversations with the client who isn't paying up, you might feel like giving up. Enlisting a collections agency is another smart option. If it seems like the step could offend a customer, just think: would you rather take them to court? Dig Deeper: Dealing with Missed PaymentsSetting Up Accounts Receivable: Additional ResourcesFor managing collections, check out this list of collections laws and how they vary by state. With a variety of training and professional development programs for people working in accounts receivable, the non-profit group International Accounts Receivable Professionals can be a great training resource. If you're just getting started and find yourself unfamiliar with some of the terminology involved in accounts receivable, check out this thorough online glossary. The Financial Managers Society is another professional organization where you can look for advice, tools and guidance. You can check out form templates at the site of the International Accounts Payable Professionals.Dig Deeper: Managing Your Receivables

For small and mid-sized businesses, the vulnerability to fraud can be compounded because of the sometimes informal nature and the fact that fewer staff members can result in less oversight -- and a lack of checks and balances.“Small businesses tend to be very informal in nature. A lot of times they’re either formed with friends or family members, and all the formalities are not in place as they would be in a larger business,” says Elena N. Lougovskaia, co-founder of Lougovskaia Boop, LLC (www.lougoboop.com), a law practice in Cleveland, Ohio, focused on business law and commercial litigation. “Employees wear many different hats and perhaps decision makers should be separated from people who sign the checks or one person should be responsible for signing check and a separate person should be responsible for accounting, processing invoices, and purchasing.” The following pages will cover the types of fraud against business, how to detect fraud in your business, and how to set up policies and procedures to prevent your business becoming a victim of fraud.

Dig Deeper: Are Your Staffers Stealing from You?How to Protect Your Business against Fraud: Types of Fraud against Business

The media is filled with stories of consumer victims of fraud.  But the reality is that businesses, especially smaller enterprises, are more often the victims of fraud than consumers.  The types of fraud can vary wildly, from accounting scams carried out by employees to fraudulent returns from customers to data theft by outsiders. Businesses have less protection than the consumer and, in some cases, can be held responsible in a business fraud scheme, owing liability to banks, shareholders, insurers, credit card processors and other entities. New laws also hold businesses accountable for liability in the event of some types of fraud perpetrated by third parties, such as data breaches.Sources of Business FraudIn order to understand the types of fraud that your business may be vulnerable to, you must first understand the different sources of these crimes. Most professionals agree that the top sources of business fraud, ranked in the order of frequency and cost, are as follows:Employees and OfficersIn previous surveys, PriceWaterhouseCoopers had found that the sources of crimes against business were evenly split between insiders and outsiders. But in the 2009 survey, the numbers tipped in favor of insiders carrying out the majority of crimes -- in 76 percent of the cases in the U.S., according to the survey. The increased financial pressures in many companies have also prompted a rise in the amount of fraud committed by middle managers, which now accounts for 42 percent of internal frauds globally from 26 percent in 2007, the survey found. Meanwhile, the Association of Certified Fraud Examiners (ACFE) (www.acfe.com) estimates that business organizations lose 5 percent of annual revenue to fraud by employees and officers. “Managers and small business owners have a tendency to trust their employees to a higher degree and, because they are doing more, they may not be as detail oriented as they should be,” says Allan Bachman, education manager for the ACFE. “That level of trust is often betrayed. Sometimes employees start taking advantage of the fact that the boss isn't looking and thinks I'm doing a great job.”The most common types of insider frauds include theft of assets and accounting frauds, but this type of crime can also include other categories, such as fraudulent worker’s compensation claims. “If you’re in a no-fault worker’s compensation state, as long as they’re injured within the scope of employment, they can receive compensation for their injuries,” Lougovskaia says. “That’s an area where employees could be taking advantage.”Employees, managers, and directors have the inside track and understand how a business works. That’s why they are able to perpetrate so many different types of schemes -- and how they can often go undetected. Bachman says that the biggest source of insider fraud against businesses involves purchasing and procurement of goods and supplies. Insiders may be buying more goods than a business needs and lining their own pockets or paying invoices to an external third party for fraudulent orders. Other common schemes, says Bachman, include creating fictitious vendors or no-show employees -- who get paid for doing nothing. Accounts payable is another area where insiders may be skimming money by taking cash payments and failing to report them or replacing today’s payments with cash paid at later dates.CustomersCustomers can also be notorious for trying to perpetrate fraud against businesses. Whether writing bad checks, using stolen credit cards, returning items not purchased from a business, or filing fraudulent injury and liability claims, there are a whole host of schemes that customers can perpetrate that will cost your business money.“This is a very litigious society, so if you own a store or surface where customers walk or you have a parking lot, you are susceptible to people claiming they fell and injured themselves,” Lougovskaia says. “If you don't have any surveillance and safety procedures in place, you are susceptible to frivolous liability complaints.” False return schemes are another type of fraud that tends to impact retailers. People sometimes bring back merchandise from one store to another or they bring back merchandise that has been used. “I’ve seen frauds where someone walks into a store and bought three pieces of merchandise, went out to their car and put the merchandise away, and came back into the store and picked the same stuff up and put it in a bag and walked out with it,” Bachman says. ContractorsBusinesses are often the target of unscrupulous contractors’ overcharging, over billing, kick backs, failing to perform contracted work or service, and other actions.Some vendors you hire may try to scam you by billing for work they never complete. “I can come into your company to provide carpet cleaning and you give me the alarm code and I come in once a month instead of once a week but bill for providing the service once a week,” Bachman says. “Of you can short out services or goods because no one is paying attention. You order 50 chairs and I send 45. There are a lot of different ways of doing this.”Third-Party AttacksA growing number of types of fraud are being perpetrated by electronic means.  Hacking, slamming (changing your telephone service without your knowledge), phishing (acquiring user names, passwords, credit card information), identity theft and other forms of business fraud are some of the most difficult to control. More businesses are being held accountable for data breaches perpetrated by third parties, as 45 states, the District of Columbia, and some U.S. territories now have laws on the books requiring companies to notify potential victims if their personal information has been stolen or otherwise compromised.

Dig Deeper: Keys to Improving Network Fraud Protection

How to Protect Your Business against Fraud: How to Detect FraudGiven that fraud against your business can impact the bottom line, it’s important to set up procedures to verify adherence to anti-fraud policies and to detect and deter possible business fraud. Lougovskaia says business executives should commit to talking control by developing an enterprise-wide, anti-fraud policy that:

Below are several ways to deter and detect fraud in your business:Employee Tips and ReportingAn often overlooked, but excellent way to prevent fraud is to develop an anonymous way for employees to report suspected fraud and work practices that lead to fraud.  Businesses that institute anonymous employee reporting detect fraud earlier and significantly limit financial losses. “You could have an anonymous tip box,” Lougovskaia suggests. If you do opt for a tip box, you should take steps to ensure that the process isn’t abused to settle personal grudges. One way would be to appoint one individual to investigate all claims and ensure that anonymity is protected.Internal Audits and Surprise AuditsWork processes, inventories, and accounting should be subject to regularly scheduled and announced internal audits.  In addition, unscheduled -- or surprise -- internal audits also should be conducted.  Work processes, inventories, and accounting can be altered in advance of regular audits, but knowing a surprise audit may occur removes temptation and increases the chance for fraud detection.External AuditsAt a regular interval, external auditors should be employed to review company accounts, contracts, inventory and work processes, Lougovskaia says.  Depending on the size of your business and whether it is a publicly-held enterprise, this may be required by law.  Thus, it makes sense to set up external audits early in the history of your business so compliance with applicable laws and regulations can be achieved as your business grows.

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How to Protect Your Business against Fraud: How to Deter Fraud

There are ways to deter fraud. One of the most important steps a business can take is to create a system of awareness at the top level of management. “Never think that it can’t happen here,” Bachman says. “Create a level of awareness throughout the organization that we're watching for it. Make it clear in terms of deterrents that, if we catch it, we're going to prosecute, both criminally and civilly.” Civil action may be needed because people who have profited from ill-gotten gains may not have the cash on hand to return – they may have bought items, such as fancy cars or jewelry.Written procedures are necessary to develop internal consistency and to insure adherence to anti-fraud work practices and policies.  At a minimum, the business should take the following steps:

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How to Protect Your Business against Fraud: Creating Checks and Balances

Internal controls are one of the great fraud deterrents. Internal controls involve the processes by which a business operates and goals are achieved. In accounting, it refers to the reliability of financial reporting and compliance with laws and regulations. Setting up good controls is important for a business to detect and deter fraud.“A lot of organizations have an internal audit department, but small organizations can’t always afford that luxury,” Bachman says. “But they do have accountants and other people in charge of keeping track of accounts.” However, small businesses may have some weaknesses in terms of controls, such as putting the same employee in charge of making deposits and reconciling bank statements. Allowing one employee/department to perform multiple critical functions is inconsistent with preventing fraud. By dividing the responsibility of certain functions, a system of checks and balances is created and this creates an environment where fraud is less likely to occur. Lougovskaia says businesses should consider the following examples to establish better checks and balances:

Implementing a fraud prevention plan requires commitment and also requires the business to provide the right tools and support to its employees. Businesses are better off if they build in deterrents, establish good controls, and provide oversight. It’s also important to encourage employees to have a conscientious attitude, says Bachman, such as: “Our business’ survival depends on employees being honest.”

Dig Deeper: How to Set Up Accounts Payable

Recommended ResourcesTen Ways to Prevent Identity Theft from Staples.comhttp://www.staples.com/sbd/content/article/i-n/identitytheft.htmlThe FBI’s List of Common Fraud Schemes:http://www.fbi.gov/majcases/fraud/fraudschemes.htmUnderstanding and Detecting Fraud by the Department of Justicehttp://www.usdoj.gov/usao/eousa/ole/video_info/ubf_part1.pdfThe United States Treasury’s Financial Crimes Divisionhttp://www.ustreas.gov/usss/financial_crimes.shtmlThe United States Post Office Mail Fraud Unithttp://www.usps.com/postalinspectors/fraud/welcome.htmPriceWaterhouseCoopers 2009 Global Economic Crime Surveyhttp://www.pwc.com/gx/en/economic-crime-survey/index.jhtml

Once you know the process thoroughly, good software can help you track receivables, including how many invoices have been sent, how many have been viewed, how many have been paid, and how much remains outstanding. The only thing to keep in mind when you automate: Before you adopt a new software or billing process, make sure your clients are notified ahead of time of any changes that will affect them or how they receive or pay their bills. The best invoices include every relevant piece of data, including hours billed if you're a service, or all the specs of a product if you're a sales organization. Being clear with clients avoids the need for follow-up questions on items that may be confusing to anyone who receives them, and that can delay payment. Your invoice should be a clean, straightforward document that includes your company logo. That said, it can contain a certain element of grace, suggests Mitch Solway, the vice president of sales and marketing at online bookkeeping and invoicing company FreshBooks, which has recently studied its customers best practices in accounts receivable."One of the best pieces of advice we’ve uncovered in recent months is to think carefully about the actual wording on the terms you apply on your invoices," Solway says. "Being polite and asking for payment within 21 days seems to get our customers paid a lot faster than terms such as 'due on receipt' or 'due immediately.'"In other words, giving customers a bit of flex room actually appears to create common good-will and speed up payment. That's just one example of the complex psychology of money manifesting itself in the receivables process. Knowing your clients well, and understanding what motivates their accounting – and accountability – can help you implement other strategies in the future to get paid without being unfriendly.Dig Deeper: How to Choose Small Business Accounting SoftwareStreamlining Accounts Receivable: Optimizing Your Billing ProcessWhatever software you choose, the goal is to stay on top of accounts and billing. That means monitoring when an account opens, the timeline of work being done, and when precisely a bill is to be sent. That can vary depending on the type of product or service you provide, but terms of payment should be clear to all clients before you provide anything to them. Setting up expectations and payment standards first allows you to be in control from the get-go. Before taking on a new client, present to them the terms of the transaction. This can be a payment policy on your sales-based website, or part of a formal contractual agreement signed by both parties before the start of your service – or something in-between. The important thing, experts say, is to put the terms of payment in writing. The most basic item a terms-of-sale agreement should include is payment schedule. To determine a timeframe for payment that works for you and your clients, consider industry standards as well as what your business needs to maintain steady cash flow. Say you decide 30 days is a reasonable expectation. You should include that fact in your agreement, and note pay-by dates on future invoices. Consistency is crucial in maintaining clients' respect and trust.

You must also establish a clear-cut method for following up on overdue invoices. Set a clear schedule of, say, a call after the payment deadline, then a follow-up e-mail within a week, followed by another call. When making collection calls, be sure to first know your state laws and follow the Fair Debt Collection Practices Act (you can check out the text of the FDCPA at the FTC website). It's the law dictating when you can and can't call a debtor (the guidelines are generally during business hours). Knowing your rights can also help you be confident throughout the process of collecting on bills – and doing so in a kind and conscientious manner can help you avoid the unpleasant process of enlisting a collections service or taking your client to small-claims court.Dig Deeper: Setting Clear Payment ExpectationsStreamlining Accounts Payable: Enlisting Outside Help

If you're still spending too much time billing for and collecting money rather than doing what you're good at, you might feel it's natural to delegate some of your bookkeeping responsibility to an assistant. Instead, consider bringing in someone at a higher level

•    A bookkeeper or contract accountant to help you stay on top of maintaining accurate records•    A credit manager or accounts receivable clerk to handle billing and following up on invoices if the process is taking more of your time as a manager than is financially worthwhile for your business•    A collection service or officer to deal with large-scale long overdue bills

•    A legal advisor if a client cannot pay up in a reasonable time frame and you think litigation may be necessaryAmenta, the financial advisor, suggests that an accountant with a regular monthly relationship with your company can help streamline the bookkeeping process by advising you on time-saving methods – and they can catch costly errors. Moreover, he or she will have your future financial health in mind. "That person can also help craft a plan for going forward, say, a two-year plan," she says. "It's really important to look at: What is this business paying too much for? Is this business venture supporting itself?"

Dig Deeper: Renting a CFOStreamlining Accounts Receivable: Keeping Tabs On Clients and Cash FlowWhether you handle receivables and collect on them yourself or employ an accounts receivable clerk, the person who regularly deals with accounting should always keep an eye on slow-paying clients. Get to know the payment schedules of your regular debtors, and know when they tend to come up short. If a client is regularly late, schedule a conversation with their bookkeeper or CEO. Without being accusatory, ask the person how you can help them to be more consistent in making payments to you. Sometimes, the answer can be as simple as synching your invoice numbers or shifting a payment schedule to an earlier or later date in the month.However, if the company you're dealing with seems to consistently pay late and doesn't want to make an effort to change, you need to reevaluate the relationship. Have they effectively created a system in dealing with paying you and their other suppliers that amounts to supplier financing? If so, how much money are you willing to lend to your client? Dig Deeper: How to Collect from AnyoneStreamlining Accounts Receivable: Adding SafeguardsIf your company deals with large accounts that may not always be reliable about payment, you might want to consider investing in payment insurance. Insuring your accounts receivable (after, of course, you have a solid system for billing and receiving set in place) can be a smart way to protect your sales against non-payment risks. Some policies can even protect you from the commercial risks that cause non-payment that you can't control, including if your client goes out of business, changes ownership, files bankruptcy, or is the victim of a natural disaster. Most policies also include coverage for general economic climate issues and seasonal hardships clients might encounter. Dig Deeper: Additional Ways To Ensure Payment