UK SMEs losing £9bn a year to fraudsters

26th April 2016 | News

More than £9 billion a year is being lost by small businesses across Britain due to fraudsters that successfully pose as suppliers on the phone, cloak viruses within bills and submit false invoices, according to a new report.

More than 1,000 SMEs were surveyed by invoice network, Tungsten, who found that almost half of respondents had been subject to a suspicious invoice or full-blown invoice fraud within the last year.

On average, a small business loses £1,658 a year to invoice fraud. One-in-six small business owners estimate that fraud has cost them more than £5,000 in the last 12 months.

Pauline Smith, head of the UK’s national centre for reporting fraud and internet crime, Action Fraud, believes that incidents of invoice fraud are in fact “underreported”.

“It’s difficult to know the true scale of this fraud type but we do know that it prevails across all types of business and no one industry is immune,” said Smith.

The Telegraph published a recent example of small business fraud when Steven Mitchell, founder of CompareTheCoffin.com, which helps bereaved customers find better deals on coffins, received an order for six coffins to export abroad.

The customer in question placed the order via email and asked if they could pay via cheque as they did not own a credit card.

Mr Mitchell said: “The order seemed genuine enough so I gave him my bank details. Before I knew it there was £64,000 in my account.”

This figure was £58,000 more than had been billed by Mr Mitchell.

“I looked into the order and saw that a cheque had been paid in to the Ruislip branch of Santander and realised he wasn’t abroad,” added Mitchell.

In common practice, Mitchell said his business manufactures their coffins on-demand, but in this instance he decided to wait for the cheque to clear before proceeding with the order.

“I contacted the shipping agent who said, ‘Not him again’. The same guy had been operating with 40 different names.”

This widely-used scam sees the fraudster request a refund of the overpayment, which is usually arranged by the business. In the meanwhile, the cheque is cancelled, leaving the business out of pocket.

“I’m a one-man band so I keep track of all orders and payments but if I wasn’t on top of things, I would have lost £64,000,” added Mitchell.