You may believe that Occupational Fraud only happens in large companies and it is not something to worry about. But, did you know that Small Businesses (defined as 100 or fewer employees) have the highest median loss across all organizations of $150,000 per incident and account for 22% of reported fraud cases?
And, worrying about fraud is not going to stop it. Employers will not be able to prevent fraud in 100% of cases. However, having a means of detection is the best step you can take to prevent substantial impacts on your business. 42% of fraud is detected by tip in which case 55% of the time it is another employee that is reporting that fraud.
Creating and maintaining a hotline or internal reporting mechanism is the single greatest way to detect fraud. This can be as simple as having a conversation with employees – asking if they see anything that seems suspicious to come talk to you or send a private email. Fraud losses were 2X higher in cases where these mechanisms were not in place. Having a fraud reporting standard or policy in your business may also prevent someone from beginning fraud in the first place; as they may be worried that they will get caught sooner.
For larger businesses where bookkeeping and accounting are handled by an employee, you should be aware of and implement internal controls. Employees should not have access to banking or credit card processing as well as the reconciliations of those accounts. Allowing both processing and reconciliation to be done by the same person will make it easier for the employee to make purchases, as well as find ways to hide them inside of accounts that go undetected.
If you want to learn more and garner some very eye opening statistics and Occupational Fraud Prevention tips – We would suggest reading the Association of Certified Fraud Examiners 2022 Occupation Fraud Report from which we gathered information for this blog.