Fraud ‘hits small firms for €100m each year’

WHITE collar crime is costing small businesses €100 million a year, research has revealed. But fear of negative publicity means many employers are keeping the bad news to themselves.

The latest research reveals that one in five firms which are hit by fraud has made no effort to bring the culprits to justice.

However, white collar fraud is “rampant” and a serious threat to business, Small Firms Association (SFA) director Pat Delaney said yesterday.

SFA research shows 80% of fraud cases are internal and only one in 10 frauds is uncovered by external auditors.

“We would actively encourage people to report fraud,” a spokesman for the Garda Bureau of Fraud Investigations said last night.

During the last three years, 60% of small firms have been a victim of fraud, with an average cost per company of €4,000. Over 10% of small companies surveyed had lost in excess of €12,000 due to fraud.

These findings clearly showed fraud was a major problem for businesses and effective internal controls were paramount in reducing a company’s exposure to fraud, Mr Delaney said. “There is a need for companies to change their culture of believing ‘it will never happen to us,’ ” he said.

Not enough business analysis was done in this area by owner managers, despite enormous investments in IT.

“Fraud is a major problem, but far too few businesses recognise the problem exists, and then only when it is too late,” Mr Delaney said

He also warned that small firms which did not have the necessary internal controls in place were “open season” for fraudsters.

“Small business tends to be reactive, rather than proactive in dealing with fraud, with only one in 10 companies having taken fraud prevention measures and risk audits in the last year,” Mr Delaney said.

This lack of action in the face of the evidence was most worrying, given that internal fraud may be costing small business in excess of €100 million a year.

Areas where firms should be most vigilant include: cash handling and lodgments, raw materials, fixtures, finished product, false invoices and delivery notes and false expense claims.