Small and medium-size businesses can be vulnerable to fraud. To discover just how common the issue is and to highlight how the UK’s 5.5 million SMEs can protect themselves against fraud, Slater and Gordon have commissioned research with 500 SME owners and managers.
In a series of fraud-related blogs, we are examining the law and offering advice to businesses about how to best safeguard themselves.
SMEs need to recognise fraud as a risk to their business.
Our research has shown that fraud has cost small businesses over £1.3 billion in the UK over the last year and £260 million of that fraud goes unreported. Yet less than two per cent of the 500 managers and business owners we surveyed thought that fraud would be the biggest risk to their business in the upcoming business year.
With one in six UK SMEs affected by civil fraud in the last year, it is time that SME owners paid attention to the risks that fraudsters present to their business.
My colleague Craig McAdam described the hidden losses this research revealed UK businesses to be suffering as “staggering” and warned that “the impact on the wider economy of these frauds should not be underestimated”. He is not wrong.
Most of the companies we spoke to agreed that fraud attempts are now more common than they were five years ago. Of those companies that had been the target of a fraud attempt in the last 12 months nearly two-thirds were targeted more than once.
Our research found that fraudulent activity cost businesses an average of £1,540 per year.
The study found that the five most common types of fraud to be:
- False invoicing (20 per cent)
- Identity fraud (20 per cent)
- Exaggerated expenses claims (22 per cent)
- Fictitious refunds (11 per cent)
- Unauthorised withdrawals by employees (11 per cent)
Nearly half of the decision makers in SMEs said they didn’t think they had adequate knowledge on fraud prevention.
You can protect your business by acting quickly when you identify fraud.
Nearly half of those SMEs who find themselves targeted by fraudsters cannot pursue the perpetrator. This number could be improved if companies carry out regular fraud audits; however, 57 per cent of the companies we surveyed had never carried out a fraud audit or stress test on their internal procedures.
Nick Gee is a dispute resolution lawyer based in the Manchester office.