Small business owners are particularly vulnerable to ‘losing it all’ if fraud strikes and cannot afford to be complacent when it comes to checks and procedures, according to MyCRA Credit Rating Repair CEO, Graham Doessel.
"Many SME's run on credit, having a smaller amount of capital - and it can mean some months are a delicate balancing act to get accounts paid on time,” he says.
"Even a single instance of fraud can mean accounts go unpaid, posing a great risk to the business' credit rating. In some cases it can also seep through to the owner's personal credit rating which can also be tied up with the business.”
The Australian Financial Review reported last month that close to one in two Australian businesses reported at least one incident of economic crime in 2011, with 16% of respondents suffering losses in excess of $5 million.
Doessel says a survey conducted by PricewaterhouseCooper shows it's rare that fraud is committed by someone outside an SME. In a small business, employees tend to be given control of cash, inventory and accounts receivable and there are few monitoring systems to check on them.
He adds that, if the business owner is not made aware of the fraud right away, it can lead to defaults on the business credit file or the owner's credit file. The business can then face great difficulty obtaining any credit.
"Most businesses can't expand, they can't buy vehicles, or even take out mobile phone plans once there are black marks on the company credit file. The onus is on the credit file holder to prove the listing has errors or shouldn't be there. Clients can often be given the run-around by creditors and there is less legal obligation on the creditor in the commercial credit landscape.”
To find out the employee fraud red flags, take a look at Australian Broker’s interview with Leo Tutt of William Buck and Joanna Bird of ASIC: Click Here