Small business owners are experiencing losses of $40,000 or more due to fraud. A survey of small businesses reveals fraudsters are enjoying rich pickings in B2B markets. The survey published by B2B equipment marketplace Kitmondo.com, also reveals that businesses can expect to be victims of fraud at least once every 15 months.
Bogus buyers are the most common source of fraud, responsible for 63% of losses, with payment scams like false credit card use the most likely cause. Several businesses reported six-figure losses and two respondents were defrauded out of $500,000. The surveyÂ reveals businesses lost an average of $40,302 each as a direct result of fraud. The survey findings also suggest fraud is a fact life for small businesses, with 77% of respondents reporting they had lost money to fraudsters.
Richard Barker, CEO of Kitmondo.com says, “The common perception is that fraudsters target little old ladies and con them out of their life savings. But the survey shows that even experienced, street-wise business owners can walk headfirst into a scam and lose money.”
Companies with less than 100 employees represent a third of all fraud cases, according to the Association of Certified Fraud Examiners. ACFE also reports that businesses lose an estimated 5% of their revenues to fraud. In reality, small businesses are particularly vulnerable to fraud because they have fewer resources and, often, fewer and less-effective anti-fraud controls.
According to Kitmondo.com’s survey, businesses have lost money to fraud every 15.22 months on average. And, since they started trading, respondents reported their businesses have been defrauded 6.24 times in total. Barker says,“The frequency of business fraud is surprising. Being on the receiving end of a fraud doesn’t appear to offer any defense against being duped again in the future.”
Evidence of the growth of fraud risk is overwhelming. Some 89.58% of respondents said they believed the risk of fraud to their business had increased or was as just as bad.
As a business owner, the best way to prevent fraud is to train your employees in fraud detection. Barker shared with BlackEnterprise.com the following anti-fraud tips.
- Conduct simple online due diligence on your new customer before committing to a transaction. Nearly everyone has an online presence of some kind and most people now leave a considerable social trail. Does that presence look natural to you?
- Ask a simple probing question about how the customer intends to use the product they’re trying to buy from you. Do they sound like they know what they’re talking about? If they trip up on a simple question, there’s a high chance they’re not genuine.
- Put a red flag out for any new customer that offers to pay full price without at least trying to negotiate with you. The “too good to be true” new customer is usually just that.
- Be vigilant to the very end of the sale. Even if the customer looks great on paper, keep a sharp eye out for non-standard behavior or last-minute requests. Trust your instinct and don’t be afraid to walk away.