Small Business News

Survey Shows Small Business Owners May Be Naive About Fraud Risks

Technological advances have long been a boon to entrepreneurs, allowing them to run their businesses more effectively than ever before. At the same time these technologies can also be exploited by fraudsters to harm costumers and businesses alike. What’s more it seems that many entrepreneurs do not believe they are susceptible to such scams because of their business’s small size.

According to a new survey from Emailage (reported on by Small Business Trends), 48% of small business owners suggested they aren’t large enough to be the target of online fraud. Simiarly 58% concluded that larger operations were more popular targets for such scams. Unfortunately this assumption may be misguided and could be cost business in the long run.

Last year U.S. small businesses lost an average of $28,313 to online fraud. That’s far worse than the median $840 that a new FTC report shows scammed consumers lost in 2018. Moreover, as Emailage CEO Rei Carvalho points out, the loss of such funds could severely hurt a small business’s prospects. “This research shows a lack of concern among many SMB owners when it comes to fraud prevention. These businesses work with considerably smaller profit margins. Therefore, losing even a fraction of their revenue could have major repercussions for their businesses, impacting long-term growth and business development,” Carvalho said.

Given the perceptions that small businesses aren’t likely targets, its no surprise that only 40% of respondents reported using email verification to help prevent fraud. That said, some also employed tools such as IP address tracking, third-party payment processors, and more. Overall, however, one in ten of the owners surveyed said they didn’t utilize any of these systems. Unfortunately for the later group, recovering from ransomware will likely become an issue they are forced to deal with.

Of course it’s not only fraud that small businesses need to be on guard against. Cybersecurity has been a growing issue for businesses of all sizes, with small businesses being disproportionately affected. In fact a 2015 study found that 71% of cyber attacks were conducted against business with fewer than 100 employees.

When it comes to protecting small businesses from fraud or cybersecurity, the first step to change small business owners attitudes. While some entrepreneurs may think that their ventures aren’t large enough for scammers to concern themselves with, the truth is that this naivety is often what makes them a prime target. Therefore all business owners should ensure that they’re educating themselves and their employees about fraud and fraud prevention measures as well as consider investing in tools that can help stop such scams in their tracks.