What is the biggest threat to your business? Cash flow? Online trading? Price cutting by competitors? What about fraud?
Fact: Your business is at risk of losing money due to fraud every day. The following statistics from Action Fraud speak for themselves:
- 1 in 4 small businesses are affected by fraud every year;
- Last year, fraud losses to SMEs were estimated at £18.9 billion;
- Nearly 1 in 5 SMEs have been defrauded by an employee at some point during their trading history.
What are the threats?
Threats from within a business are significantly greater than threats from external sources. Over recent years there have been an increasing number of fraud cases involving employees. Businesses have suffered losses resulting from theft of physical assets or information. Information theft can be difficult to quantify but internal financial fraud directly hits the bottom line.
It is easy to rely on the knowledge that you can always claw back funds through the Courts. However, if those funds have been spent repaying debts or enjoying holidays and expensive restaurants, that reliance may be misplaced.
74% of fraud takes place in the private sector, resulting in losses of over £140 billion each year. Statistic from the 2017 Annual Fraud Indicator produced by the UK Fraud Costs Measurement Committee (UKFCMC).
What should you do?
Above all, prevention is the name of the game. Given the prevalence of employee fraud, ensuring you have thorough recruitment procedures and robust employment contracts should be your first priority. Whistle blowing procedures should follow closely behind. Another area is to check your internal controls. Are they well-designed and adhered to? Having tight controls is the best way to prevent fraud on a day-to-day basis.
The key controls to focus on relate to; cash handling and access to bank accounts, access to IT systems and information and approval of new supplier and customer relationships.
You can find even more hints and tips in our blog: top tips for avoiding employee fraud