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SME frauds – what to watch out for

SME frauds – what to watch out for
Wednesday, January 24, 2018

Fraud committed against small- to medium-sized businesses is nothing new. However, since we have entered the digital age and the world has become a lot smaller through communication, the risk of being a victim of business fraud has greatly increased.


Fraud hits your bottom line – for some businesses, fraud has a truly devastating effect on their viability.


According to official government statistics, fraud costs the UK as a whole (consumers and businesses) £29bn a year


Here are the three frauds which affect British businesses the most.


Online and data theft


The most common forms of online attack were email phishing, CEO fraud, and invoice scams.

  • Email phishing involves a fraudster pretending to be from HMRC calling or emailing your company claiming that you are owed a tax refund. The con-men claim that they need your bank details in order to pay the refund. Of course, they are, in fact, using these details to take money from your account instead.
  • CEO fraud involves a member of your accounts team taking a call from “you” or another board member demanding that an invoice to a particular supplier be paid immediately otherwise the supplier will freeze the account. The CEO either emails the bank account details and the amount to be paid over or gives those details over the phone. By the time someone realises it was a scam, it’s too late to get the money back.
  • Invoice scams are a variation of CEO fraud where, particularly in larger companies with 50 or more staff, the head of accounts is emailed or posted a fictitious invoice for goods or services which no-one has authorised the purchase of. The head of accounts is then subjected to a peculiarly aggressive debt chaser to make payment as quickly as possible. It can be months before anyone in the company notices that money has been paid to a non-existent supplier.

As time goes by, the numbers of ways that fraudsters are using internet and telephone communication to extract cash from unsuspecting customers continue to grow.


Cash theft


This is a particularly difficult type of fraud to stop in businesses using cash either as a means of customer payment or businesses for which it is necessary to have a petty cash float. Any theft from staff (or anyone else) is tax deductible, although this is scant consolation for a victim.


The most common method to guard against theft from a till is the installation of CCTV cameras above the sales counter. These systems will display the value of the sale being entered into the till at the same time as visually recording the cash being offered by the customer and the change being given.


For petty cash theft, we recommend you implement a procedure rigorously enforced showing who is receiving money from the float and the receipts for purchases made from each withdrawal.


Sales team fraud


This is most often seen in companies which have outbound sales and telesales teams. In most such situations, individual sales representatives and their managers are incentivised with commission packages to hit their targets – that is, the level of sales the business wants them to hit.


It is not unknown for a large order to be put through by the end of a sales month. Commission is then paid on that large order only for the customer to come back later and substantially reduce the level of the order.


In these cases, we would recommend that your sales and commission recording systems be amended so that, when an order is reduced, a claim back on commission can be made later from the rep and the sales manager.


Alternatively, instead of paying commission in the month following the sale, you may wish to wait three months before you pay out on any orders.


A difficult conversation that needs to be had


People steal and defraud for all sorts of different reasons and very few of these reasons are because of the qualities you have as a managing director, the ethos your business has, or the professionalism of your organisation.


No-one likes to think their staff are stealing from them – that is particularly sickening. If they only knew how much time, blood, sweat, and tears you had taken to build the place up so that it could offer them the jobs and the job security they enjoy – it drives many business owners to genuine despair.


If you want to talk about preventing fraud in your business and ways to use your online bookkeeping package and Panthera’s team’s experience, please call us today on 01235 768 561 to speak with your usual Panthera partner, and to get up to speed with the latest updates regarding the policy change.

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