Fraud costs small businesses

Small Canadian businesses lose thousands of dollars each year to fraud. Education is the key to preventing it.

Fraud cost small Canadian businesses an average of $6,200 each in 2015, according to a recent Canadian Federation of Independent Business (CFIB) report. It found that 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 8 per cent of defrauded businesses recover their full financial costs.

Aaron Aerts, an economist in the B.C. office of the CFIB, says that one of the most important things small businesses can do is identify frauds. “Staff need to be trained, but most small businesses don’t spend enough time training. It’s much easier to prevent fraud than to follow it up.”

He said that the number one fraud employed against small businesses is payment fraud, where someone tampers with the credit card processing terminal. Another one is attempted e-mail scams. “Always be sure to check out your e-mails, and ask questions,” he says. “Frauds are getting pretty sophisticated.”

Another fraud that small businesses fall victim to is directory fraud, where businesses receive what looks like an invoice for a service, such as a Yellow Pages listing. Aerts advises businesses to be wary of any invoices that look suspicious. “Definitely be aware of directory fraud. The invoices can look legitimate, but they aren’t.”

People phoning small businesses to say that they are not compliant with health and safety or workplace bullying policies are another big fraud, says Aerts. “The caller will say that the business needs to get something in order to comply, and will say they can provide it for a certain amount of money per employee.” Aerts says that businesses end up paying for information that they could get for free from places such as WorkSafe BC. “If you need a written policy regarding, say, workplace bullying you can get a free template from the provincial government website.”

Aerts notes that the “non-compliance” fraud is a very prominent one when it comes to small businesses. “It works because the businesses want to be in compliance but don’t always have the time or manpower to investigate options.”

Many small businesses don’t report fraud because it’s time-consuming and stressful, says Aerts, preferring just to swallow the loss. However, he notes that it’s important to report fraud, and to make sure staff are aware of the various types of fraud out there.

“Don’t just take things for granted. If it smells fishy, check it out.”

For more information about preventing fraud go to

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