What comes to mind when you hear the term “fraud?” Enron? Bernie Madoff? It’s likely to be complicated schemes swindling millions from Fortune 500 companies and not a small company like yours, built on strong relationships and honest practices. While it may not make national news, smaller businesses are both more likely to be affected by occupational fraud and suffer greater losses than large companies. According to a study of 1,388 fraud cases by the Association of Certified Fraud Examiners (ACFE), more than 30% occurred in businesses of fewer than 100 employees, with a median loss of $147,000. Can your company afford a loss like that?
In small organizations, it is harder to divide work processes among more than a few people. Because of their size, these same small businesses are less likely to have procedures for sound internal oversight. The result is that fraudsters can more easily begin schemes and keep them going for longer. Too often, owners and managers rely on personal trust in place of documented policies, periodic reviews, and thorough record keeping. But trust alone isn’t enough to safeguard against fraud before it happens. As the old saying goes: Trust, but verify.
This eBook identifies and discusses five kinds of schemes that commonly threaten smaller businesses: payroll, purchasing, expense reimbursement, cash receipt, and hiring. All of these except hiring fraud are asset misappropriation schemes, which involve direct embezzlement of resources and revenue.