Small businesses fail to report fraud losses of £260m, survey finds
Almost one in five small businesses fail to report fraud - a reluctance which costs hundreds of millions every year, according to new analysis.
Spiralling numbers of scams and poor prevention have led to "staggering" hidden losses of around £260 million across UK businesses, law firm Slater and Gordon said after conducting the research.
They surveyed the owners and managers of 500 small and medium-sized enterprise (SMEs), finding fraud was committed by employees in one third of cases and by a contractor one in four times.
The most common cons were false invoicing, identity fraud, exaggerated expenses claims, fictitious refunds and unauthorised withdrawals, according to the research.
Britain has some five and a half million SMEs who suffer around £1.3 billion in fraud losses each year and of that around £260 million goes unreported, the law firm said.
Craig McAdam, head of dispute resolution at Slater and Gordon, said: "The hidden loses to business revealed in this research are staggering.
"Small and medium-sized enterprises are the backbone of the British economy and the loss of several thousands of pounds to a company can mean the difference between being able to invest and innovate or not."
The findings also revealed one in six SMEs said they had had been the victims of crime in the past year while two-thirds feared "reputational damage" by reporting the fraud.
On average, it took almost six weeks for suspicious activity to be discovered.
Mr McAdam said SMEs may be targeted by "unscrupulous people" who assume the business would not have the means to "prevent or detect fraud".
He added: "If fraud is committed it is vital to detect it as soon as possible. The sooner it is picked up the more opportunity there is to recover funds through injunctions and other legal avenues."
More than half of businesses (57%) said they never carried out fraud audits or tested their procedures as they assumed they were protected.