Fraud is a major threat to the Canadian small business community, hitting victimized small businesses an average of $6,200 in financial costs in the past year, according to a groundbreaking new Canadian Federation of independent Business (CFIB) report.
One third of small businesses have experienced one or more fraud attempts in the last 12 months, and one in five have fallen victim. Only eight per cent of defrauded businesses recovered their full financial costs.
“Fraud is a serious concern that can disrupt regular operations. Victimized small businesses have little chance of recovering their losses, so it’s critical that employers understand how to protect themselves,” said Plamen Petkov, CFIB vice-president for Ontario and Business Resources. “While the money is significant, business owners have told us that the non-financial costs have an even greater impact on their business.”
Lost time (84 per cent), negative emotional impacts such as stress (61 per cent) and negative impact on staff morale (29 per cent) were cited as the top non-financial impacts of fraud.
The most common type of fraud causing a loss for small businesses is fraudulent payments. The most common attempted frauds are email scams and phishing, followed by directory fraud, malicious software and phone scams. Businesses in the retail and hospitality sectors are more likely to experience financial losses from fraud, while businesses in the wholesale sector are most likely to experience fraud attempts.
Small businesses spent an average of $2,900 on fraud prevention in the past year; however, only three in ten small businesses train their employees to identify fraud.
“The threat of fraud is not going away,” added Petkov. “When it comes to preventing fraud, awareness and vigilance are key. Most small businesses take some preventative measures; they can do even more by training employees to spot signs of fraud.”
March is Fraud Prevention Month and CFIB is focused on helping businesses help themselves through education and access to resources. As a proud member of the Fraud Prevention Forum, a working group that includes CFIB, the Competition Bureau, and the RCMP, the month-long campaign and the publication of the report aim to help small businesses protect themselves against fraud.
Go to cfib.ca/BeFraudFree for more information throughout the month and be sure to follow #BeFraudFree on Twitter.
