Median Fraud Loss is $200,000 For Small Businesses
Imagine it’s the end of the year, and you take a look at the numbers to see how your company fared this year vs. last year. Given cash is tight, you look more closely at expenses that you typically skim over. You notice office expenses increased a bit more than expected. The amount doesn’t appear overly significant, but your 12 o’clock meeting was cancelled, so you justify spending a little extra time looking into it.
What you discover changes everything. The company credit card has been used over an extended period of time to purchase a variety of items for personal use. Three months and thousands of dollars in professional fees later, you finally have enough evidence to fire the employee who committed credit card fraud. Next comes the exhaustive, costly, and time-consuming legal process of attempting to recover the $200,000 that was stolen.
What makes $200,000 the right figure to use in this example? It is the median loss, due to fraud, of businesses with fewer than 100 employees according to a recent report released by the Association of Certified Fraud Examiners (ACFE). Other common examples of employee fraud include:
-Expense Reimbursement – similar to credit card fraud, this type of fraud involves employees submitting fake or personal expenses to be reimbursed by the company.
-Check Tampering – this one is as simple as it sounds but is hard to prevent or detect without proper controls.
-Payroll – can consist of overpaying employees, paying phantom employees, paying inactive employees, among other schemes.
-Purchasing – examples can include disbursements for personal goods or services, creation and payment of fake vendors, etc.
-Cash Receipts – whether you’re dealing with a for-profit or not-for-profit company, often times, employees have the opportunity to pocket income before it is recorded in the accounting system.
Internal controls – especially segregation of duties – make a major difference in combating fraud.
However, putting controls in place and applying them consistently is often overlooked because “my employees are trustworthy and would never do anything like that,” or “we just don’t have the time or staff to do that.” That is, until it happens to you.
Additional musing on the numerous ways money can be stolen from your company isn’t particularly uplifting; however, these situations can be prevented. Check out this blog for tips on how you can do so: https://www.pricecpas.com/fraud/
Whether you find yourself needing assistance in creating controls to prevent fraud or you find yourself in a situation where fraud is suspected, we at Price CPAs have the resources to help. Contact us today and request a conversation with one of our specially trained professionals. Call us at 615-385-0686 or contact us through our website, www.pricecpas.com.