EMPLOYEE THEFT: SMALL BUSINESSES BEWARE!

3Fraud costs businesses uncounted billions a year. Consider these conclusions from a 2011 worldwide survey by the Association of Certified Fraud Examiners:
  • Survey participants estimated that the typical organization loses 5% of its revenues to fraud each year.
  • The median loss caused by the occupational fraud cases in the survey came to $140,000. More than one-fifth of these cases caused losses of at least $1 million.
  • The most common method of fraud was check tampering, followed by skimming (the theft of unrecorded sales), billing manipulations and expense reimbursements.

In fact, small businesses are usually more vulnerable to embezzlement than Fortune 500 corporations. "Small companies are more prone to becoming victims of embezzlement because they don't have internal controls and have oversights by outside auditors," says accountant and former IRS agent Gary Iskowitz.

One reason small companies take a bigger hit is because the scams are harder to detect and last longer, sometimes several years, experts say. Despite their vulnerability, many of these businesses don't take basic precautions to deter fraud. "There's a reluctance to think about this, compared to larger companies. The attitude is, 'I've got too many other things to think about as a business owner,'" said Rich Simitian, Southern California managing partner for accounting firm Grant Thornton.

Most of the fraudsters aren't hardened criminals but rather longtime, often trusted workers who rise through the ranks and take on major responsibilities. Employee theft usually starts small and then escalates over time, often triggered by the worker's personal financial problems.

To learn how you can develop a comprehensive program to help protect your business from these "inside jobs," feel free to get in touch with our risk management specialists.

Need insurance for You, Your Family or Your Business?
We can match you to a qualified, local insurance expert!
Further Reading
A recent nationwide study found that a growing majority of businesses are providing financial incentives to workers who take part in health improvement and wellness programs. According to the Aon Hewitt 2012 Health Care Survey of more than 2,000 empl...
Small business owners who have previously borrowed money can attest that actually being capable of repaying the loan is the core of credit worthiness. They can also attest that the approval process significantly hinges on how risky the applicant appe...
More than 10% of small businesses had employees show up for work last year while under the influence of at least one controlled substance, according to a recent nationwide study. The survey of more than 500 businesses with 100 or fewer employees, com...
Some large companies offer great perks like paid gym memberships, flexible scheduling or company stock. You may not receive these perks as a small business employee, but you could be eligible for valuable health insurance. As many as 54 percent of sm...
It’s often difficult to maintain the delicate balance between what a business needs to succeed and what employees need to succeed. Of course, in regard to the rebuilding of the American economy, the fact that so much hope is being placed on the shoul...