In 2018 it was estimated that the financial cost of fraud for the UK was £110 billion and globally over £3 trillion*. In fact, over half of UK businesses have been hit by fraud in a two- year period.

There is a high chance that many SME owners reading this article will see their company suffer from fraud – in fact it may already be happening in your business.

The problem is more pronounced for SMEs which are going through a stepchange or scaleup in growth. These companies are able to expand rapidly with digitalisation and more complex IT systems which is the perfect environment for fraudsters. Very rarely is investment in the Finance Department, Head of Finance or general anti-fraud measures seen as a priority.

This lack of investment creates a huge opportunity for fraud because, as the SME grows, the owner/ MD naturally becomes more distant from suppliers, customers and employees and top level, personal relationships become less important for day to day operations. New checks and balances are therefore necessary to mitigate fraud risk.

Effective Transitional Financial Management tackles fraud risk “head on” and introduces the skills, systems and procedures to minimise the opportunity of #SMEfraud. Areas addressed include:

Know your suppliers

Know your customers

Know your employees

Know your systems

Identify high risk areas.

Introduce segregation of duties

Introduce robust cash management systems for all payments and receipts with special controls on:

In additional, consider the introduction of cameras in areas where cash is handled.

Carry out internal anti-fraud audit checks

Ensure all procedures are adopted by your quality/ BMS systems.

Ensure all the above is visible.

The above steps are minimum steps your Finance Department needs to introduce to reduce the opportunity for fraud. Whilst they will not eliminate it, they will go a long way to reducing the opportunity for fraud.

Mark Marsh

* Crowe Clark Whitehill, together with the University of Portsmouth’s Centre for Counter Fraud Studies (CCFS)

Mark Marsh has over 20 years of experience working as a finance director in SMEs based in the North East of England with international subsidiaries. Mark has over 13 years developing North American finance functions.