Fraud is reaching epidemic proportions at small companies, which are fleeced by an aggregate $2.9 trillion. That’s the estimate in a 2011 study from the Association of Certified Fraud Examiners (ACFE).
ACFE reports the median loss is $150,000, or 5 percent of the annual revenue. Some 30 percent of the companies have 100 or fewer workers. To add insult to the proverbial injury for such businesses, 25 percent of the persons responsible for the fraud had been trusted employees for at least 10 years.
Credit and cash challenged employees in the economy is partially attributed as a cause for the epic fraud numbers.
Unfortunately, some long-time employees seem to have a sense of entitlement when working at small companies that probably pay less than large firms.
Small companies are probably more trusting of workers and are likely less sophisticated in financial controls while being focused on marketing for survival.
ACFE indicates it takes a company about a year and a half before discovering the shortages. More than 85 percent of the perpetrators didn’t have records of committing fraud.
The fraud trend suggests the need for financial controls and insurance protection against losses. That means taking steps to prevent such opportunities among your accountant, bookkeeper, office manager, sales manager – anyone who might have access from your billing records to checking account.
It also means getting an outside participant to review your finances, and explaining your controls to your insurance company. Your insurer will likely have suggestions, and provide premium discounts as a result of your financial controls.
Yes, marketing and other issues are problematic in this economy, so stay focused on them, but secure your finances, too.
From the Coach’s Corner, as is the custom on these pages, we typically discuss the solutions to problems.
Here are resource links to actually prevent fraud:
Embezzlement Tips to Protect Your Nonprofit or Company Assets — Embezzlement is a widespread nightmare in business and the public sector. If you surf the Internet using the key word, embezzlement, you’ll find seemingly countless headlines. Upper management commits 18 percent of fraud, according to the Association of Certified Fraud Examiners (ACFE) in 2010. ACFE also said accounting department employees commit 29 percent of fraud.
Liars and Cheats – Clues You’re Dealing with a ‘Pinocchio’ in Business — Italian writer Carlo Collodi probably had no idea what he was starting in 1883 when he wrote the children’s novel, The Adventures of Pinocchio. It was the story about a woodcarver who created a wooden puppet that wanted to become a real boy. Pinocchio’s short nose would grow longer whenever he told a lie.
The New Face of $1 Trillion in Cybercrime on Business – Account Takeovers, Credit Card Fraud — Business Web sites are facing an increasingly intense full-court press from cybercriminals – the aggregate cost of cybercrime annually, which includes prevention strategies, has exceeded $1 trillion. Large-scale data breaches are savagely victimizing new accounts while account takeover attempts and credit card fraud has doubled, according to a fraud-data study in June 2013 .
Strategies for Retailers to Prevent E-Commerce Fraud — Merchants are certainly aware of online fraud and 65 percent are trying to fight it, but their efforts aren’t working according to a study. The anti-fraud study was conducted by CardNotPresent.com and SignatureLink in 2012.
Identity Fraud Escalates in Smartphones, Social Media — Skyrocketing mobile malware threats amid widespread use of BYOD, bring your own devices, will lead to a $1.88 billion services market in 2013. That’s according to ABI Research. Cybercriminals are successfully attacking vulnerabilities in individual devices and networks to an ABI report.
11 Travel Tips – Save Money, Prevent against Cyber Theft, Fraud — The most vulnerable travelers are businesspeople. That’s because they have to use Internet and e-mail. They’re in danger expressly from vulnerabilities, such as from wirelessly accessible passports to using WIFI.
Security Steps for Your Mobile Device in Online Banking, Purchases — Almost 90 percent of Americans use a cell phone and more than 50 percent have smartphones, according to published reports. They also indicate 28 percent of smartphone owners use their devices for online banking.
“Trust, but verify.”
Author Terry Corbell has written innumerable online business-enhancement articles, and is a business-performance consultant and profit professional. Click here to see his management services. For a complimentary chat about your business situation or to schedule him as a speaker, consultant or author, please contact Terry.