By Nathan Denny
Here’s a sobering statistic for small business owners: It’s been reported that companies lose a whopping $2.9 trillion each year to fraud committed by their own employees. And about 30 percent of these companies are true small businesses, employing fewer than 100 people.
These figures are on a global scale — the typical median loss is $150,000 for U.S. firms. That translates to about five percent of annual revenue.
The report, from the Association of Certified Fraud Examiners (ACFE), found that “small organizations are disproportionately victimized by occupational fraud,” JobMouse reports.
The reason? Smaller companies typically don’t invest in anti-fraud measures that larger corporations do.
Read it now: Worker Fraud Costs Small Businesses $2.9 Trillion Annually from TheJobMouse
“[T]he numbers send a clear message about the vulnerability of small organizations,” said Scott Patterson, an ACFE spokesman, via MarketWatch. “Even more disconcerting were findings about the perpetrators — as many as a fourth had been at the organization for 10 years or more, he said.”
That’s the bad news. Here’s the good: Some steps can be taken to cut off this fraud at the source. There’s employee-dishonesty insurance coverage, and basic anti-fraud controls like creating a healthier company culture.
“Most general insurance policies for businesses include some modest fraud coverage,” the WSJ article continues, “but insurers also offer liability policies to protect specifically against worker theft, often called employee dishonesty or fidelity policies.”
And, to create a healthier company culture, business leaders can:
- Fight perceived pay inequality. Employees who feel, rightly or wrongly, that they’re not earning what they deserve feel less guilty about “taking a little extra.”
- Look more closely at the numbers. The ACFE report says the top fraud schemes in small businesses involve billing, check tampering, corruption, and expense reimbursements. While trust is a good thing, careful oversight is even more important.
Originally published: Oct 28, 2011