Study: Fraud Is Increasing Concern For Small Firms

Small businesses are increasingly becoming concerned about fraud especially over the Internet, according to a new study (pdf).

Eighty-four percent of small firms said they are more concerned about fraud in connection with their business finances than they were a year ago. Additionally, 74 percent of respondents said they rely heavily on the Internet to conduct business and 78 percent believe their business may see more risk from fraud over the next few years.

Online identify theft was cited by 65 percent of respondents as their top concern but check fraud, like forged or altered checks, and credit-card fraud were the most frequently experienced. The survey was conducted by consultancy StategyOne for the National Small Business Association and SunTrust Bank.

Small business owners under 45 years old, those bringing in $5 million or more in gross annual revenue, and those with more than 50 employees were "significantly more likely than their counterparts to report that the amount of business that they conduct online has increased over the past year," the study said.

About 25 percent of respondents said their business had been a victim of fraud. More than half of those victims said they lost more than $50,000 due to fraud with the remainder of the group saying they lost about $10,000 thanks to fraud.

Of the 500 southeastern small business owners surveyed, men were significantly more likely than women to report that their business has been the victim of fraud.

The survey found that fraud struck a small business an average of six times. Although most business owners became aware of fraud at their firm within a week, it usually was their bank that made the discovery.

Small business owners are taking steps to combat fraud, with 66 percent saying they have taken actions to protect their business against fraud in the past five years. About 62 percent say they are limited in the options available to them to safeguard against fraud.

The NSBA recommends that small firms diversify staff involvement in finances so that no one staff member is solely in control of payroll and benefits. "Unfortunately, there is a decent level of employee fraud that occurs and diversifying offers checks and balances on employees," said Molly Brogan, the association's vice president of public affairs. "Additionally, if there is one employee looking over the same data day after day, it's highly possible that someone may gloss over" any warning signs by accident.

For more information on protecting yourself and your business from online fraud, see washingtonpost.com's special section on the topic.

By Sharon McLoone |  November 12, 2007; 10:25 AM ET Data Points
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Another thing that can do better is educate their users about security threats to mobile devices and data: http://www.baselinemag.com/article2/0,1540,2215391,00.asp

Posted by: Pam Scott | November 20, 2007 9:36 PM

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