Unreported small business fraud reaches ￡260m a year
The average small business is targeted by a scam three times a year, with a total of £260m worth of fraudulent activity going unreported every 12 months, according to new research.
A study undertaken by business law specialists Slater and Gordon revealed just how frequently smaller firms in Britain suffer at the hands of fraudsters, and the tendency of business owners to write off the losses.
Exaggerated expenses claims were found to be the most common route for fraudsters, while false invoicing and identity fraud each made up a fifth of all violations.
The principal warning for owners of small firms came from the amount of fraudulent activity that took place within the workplace. In a third of all cases, fraud was committed by a permanent employee, and by a contracted worker in one in four cases.
The research highlighted a lack of awareness among small companies in how to effectively prevent the causes of fraud.
One in ten business owners surveyed claimed that they did not have the sufficient budget to carry out fraud checks, while just under half said that they suffered from a lack of adequate knowledge to avoid a scam.
Almost two thirds of small companies that had suffered at the hands of scammers admitted that fraudulent activity was unreported due to a risk of reputational damage to the business.
Commenting on the findings, Craig McAdam, head of dispute resolution at Slater and Gordon, warned that small firms are often targeted by fraudsters “because they lack the resources to put in place the systems and controls frequently required to safeguard against many of these scams”.
McAdam stressed the importance for small firms to have “robust infrastructures” in place to prevent fraud taking place, but also ensuring the correct procedures following any fraudulent activity.
“It is also important to act quickly once a potential fraud has been identified. Companies can freeze assets and take steps to recover loses through the courts,” he added.
The key message for business owners was that “prevention is always better than cure” – the owners of small firms should ensure that the correct structures and controls are in place to target the causes of fraud.
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