Failure to report fraud losses is costing small businesses
Nearly one in five small businesses has failed to report fraud according to new research, and it is costing firms hundreds of millions of pounds.
Poor security and prevention methods, alongside a rising number of scams has seen firms face hidden losses in the region of £260 million, according to Slater and Gordon.
The law firm found that employee fraud occurred in one third of cases, while one four times it was done by a contractor.
Among the most common instances of fraud were identity fraud, false invoicing, fictitious refunds, overstated expenses claims and unauthorised withdrawals.
The research suggests that around one fifth of the £1.3 billion in fraud losses faced by the UK’s small businesses every year goes unreported.
The losses faced by the small firms could badly hinder their ability to expand or seek new business, or may leave them in financial difficulty in the most severe cases.
If they are unable to innovate or invest, they may fail to hit targets and may lose out further as a result – restructuring might offer a solution, especially if a firm faces too much debt as a result of dealing with fraudulent activity.
One in six firms told the study they had been victims of crime in the past 12 months, while two-thirds of companies said they held back on reporting fraud for fear of the reputational damage it might cause.
The research also found that it took an average of six weeks to uncover fraud or suspicious activity, although firms with fears may wish to undertake forensic accounting to ease their worries.
Detecting fraud as soon as possible is key to limiting its impacts, as there are then more opportunities to explore legal avenues and recover funds.
Of the firms taking part in the survey, 57% said they had never undertaken a fraud audit or tested their security measures and procedures to ensure they are effective.
By Phil Smith
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