According to the Association of Certified Fraud Examiners (ACFE), organizations lose 5% of their annual revenue to fraud each year, and small businesses are the most vulnerable. A typical case costs an organization $8,300 per month, and it’s not usually caught for 14 months. This results, on average, of a total loss of over $100,000! The real estate and financial sectors have the highest losses.
PricewaterhouseCoopers (PwC) concurs with ACFE’s assessment. In their research of 5,000 companies, 47% of them had experienced fraud in the last 24 months.
What Types of Fraud are Most Common?
Again, according to the ACFE:
- 86% is Asset Misappropriation. This happens when people who are entrusted to manage the assets of an organization steal from it.
- 43% is Corruption. Forms of corruption vary but can include bribery and embezzlement. Corruption can also include money laundering and human trafficking, though it is not restricted to these activities.
- 10% is Financial Statement Fraud, which is the deliberate misrepresentation of an organization’s financial condition.
What Can You Do to Stop Fraud?
The following measures are proven to significantly curb company losses:
- Provide employees a mechanism to report wrongdoing. Whether they witness wrongdoing inside the company or see a vendor or customer commit a crime, your workers need to feel safe to say what they saw. Hotlines should be available 24/7 and allow the caller to remain anonymous.
- Implement an anti-fraud policy. The policy must include consequences for scamming, including fully prosecuting individuals who break the law.
- Provide ongoing training. Employees, contractors, and suppliers should all be trained on how to detect and report fraud. The training should be repeated annually.
- Have an annual financial audit performed by an outside accounting firm. Small businesses often skip audits due to costs, but Certified Professional Accounting firms can often detect irregularities faster than you can, saving you both money and aggravation in the long run.
- Require two signatures on every check the company writes.
- Perform comprehensive background checks on all new hires. Before making an offer of employment, make sure the potential hire doesn’t have a criminal record tied to fraud, scamming, or stealing.
“When it comes to preventing and tackling fraud, our research shows that a dollar invested now is worth twice as much when a fraud hits.” – Kristin Rivera, PwC Global Forensics Leader
Need an investigation? Turn to SACS Consulting.
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