Business owners see fraud as a big threat

• Fraud is considered to be as big a threat as burglary

Business owners believe fraud is as much of a threat to their business security as burglary but many are failing to take the most basic precautions to prevent it, according to research from accountants and business advisers MacIntyre Hudson.

The survey of owner-managed businesses shows that 38 per cent see fraud as the single biggest threat to the security of their business, compared to 36 per cent citing burglary. Amongst those worried about fraud, the biggest concern relates to the possibility of fraud by employees, with 27 per cent of owner managers seeing a fraud committed by one of their own employees as the biggest threat to their business.

No owner-manager would even think of leaving their premises unlocked. However, despite their concerns about fraud, many are much less vigilant when it comes to white collar crime. Only 39 per cent of owner-managers ever check for irregularities by undertaking on-the-spot checks. Just 26 per cent require that cheques have double signatories and only 11 per cent ever change the staff who reconcile their bank accounts.

Despite their concerns about employee fraud, the recruitment practices of owner-managers could also leave them exposed to a more experienced fraudster. Whilst 82 per cent take up references for new staff, only 39 per cent check the legitimacy of qualifications and only 34 per cent carry out criminal record checks.

Howard Lewis, partner at MacIntyre Hudson commented on the findings:

"Fraud in the workplace is as common in a smaller business as in a large company. However, for smaller businesses, it is more difficult and time consuming to undertake the necessary checks. Moreover, the close family-type working environment which characterises many owner-managed businesses is often based on mutual trust. Whilst the vast majority of people are honest, this situation does mean that directors can let their guard down and staff can start to abuse the trust that is bestowed upon them. In the majority of cases, employees start small with their actions becoming increasingly audacious as they realise that they are getting away with it."

Howard Lewis concludes:

"We cannot stress enough how important it is for owner-managers to foster an environment where trust is combined with vigilance and backed up with robust systems to remove temptation."