Last year, the Association of Certified Fraud Examiners, Inc., released a report regarding how business fraud can affect a business in Las Vegas and across the country. The report revealed that the most common type of occupational fraud is asset misappropriation, which accounts for 85 percent of the cases the organization analyzed. However, though it was the most prevalent, it was also the least costly. The ACFE determined that the median financial loss associated with asset misappropriations was $130,000.
Financial statement fraud, on the other hand, was found to have a significant impact on a company’s revenue. The ACFE reports that the medial loss associated with this type of fraud was $1 million. The third type of fraud that researchers studied was a corruption scheme, which cost businesses a median loss of $200,000.
Entrepreneur magazine warns that business fraud will affect nearly half of all small businesses. This is often the result of a corrupt employee. Fortunately, Entrepreneur has several suggestions for avoiding business fraud, such as the following:
- Use an outside third party to review financial statements and accounts every year.
- Have more than one person sign checks.
- Avoid nepotism and establish a culture of accountability.
- Reconcile accounts and payroll records at least four times a year, if not monthly, to look for evidence of fraud.
Entrepreneur also recommends taking steps to prevent employees from becoming disgruntled. Paying fair wages and providing benefits when possible is part of that equation. Though some of these measures could cost money in the short-term, the expense could mitigate the risk of a much larger loss down the road.