The ACFE (Association of Certified Fraud Examiners) Global Fraud Study disclosed that a typical business loses an average of 5% of income each year because of fraud. Universally, this translates to deficits of roughly $3.7 trillion, according to anti-fraud experts.
Furthermore, other than lost income, there are also unforeseen costs. For example – decreased productivity, low employee morale, tarnished brand images, and ruined reputations resulted from personnel and employer fraud.
Despite such sobering fraud statistics, do not think that it is too late to acquire the latest information and implement proactive methods that avoid, detect, and investigate prospective acts of business fraud. There are facts that you need to be aware of concerning the different types of fraud performed in the workplace. You also need to learn what can be done to create powerful controls in vulnerable regions of your organization.
Small Businesses Suffer Bigger Monetary Losses
Although both small and large businesses fall victim to fraud. The ACFE discovered that businesses with fewer than 100 employees are most susceptible compared to their superior equivalents. Larger companies are more likely to implement anti-fraud practices, such as internal departmental audits, hotlines, and employee fraud training. In smaller companies, they are less likely to execute similar anti-fraud measures that detect fraud sooner.
Fraud Creating a Monetary Impact on Businesses
According to the ACFE, cybercrime and identity theft (specifically credit card abuse) are among the biggest common means of fraud in small-scale businesses. Unfortunately, small companies suffer a bigger financial hit due to unscrupulous behavior in their business.
ACFE’s statistics reveal that thought corruption cases and asset misappropriation causes significant losses to businesses. The most monetary damage with a median of $1 million is due to financial statement fraud.
Another source of trouble for businesses looking to maintain insurance claims and costs is workers’ compensation fraud. The NICB (National Insurance Crime Bureau) has estimated that approximately 25%, or $7.2 billion per annum, is because of workers’ compensation fraud that businesses have to suffer. If a business considers its bookkeeping records, they might be able to calculate their business’s fraud statistics specifically.
Battling Fraud in your Business
Research has shown that fraud is indiscriminate of industry, employer size, or geography. Therefore, it is vital to take active steps to avoid and mitigate the impacts of fraudulent activity.
CFE fraud experts indicate that anti-fraud regulations’ implementation supports reducing monetary losses and the duration of fraud schemes. Decreasing the spell of fraud is critical because the lengthier the fraud lasts, the more financial damage it can cause to a business.
Best Practices for Detecting and Preventing Fraud
Some practices have proven to be particularly successful at detecting and preventing and fraud in businesses:
- Instituting an anti-fraud hotline
- Implementing a code of conduct and an anti-fraud policy
- Establishing fraud training and management review procedures for executives, employees, and managers
- Conducting surprise inspections
- Directing external inspections of internal controls utilized in financial reporting
- Applying systems that actively analyze and monitor company data
Though it’s certainly essential to implement and monitor anti-fraud restrictions, not all anti-fraud processes are made equal. For example, the ACFE discovered that from the 80% of fraud cases reported, about 42% were identified via hotlines than the 3% found through external audits.
If you are unsure about which anti-fraud control to use in your business, consult with an anti-fraud consultant, a fraud examiner, or an auditor for advice on the measures that will be effective for your business.
The bottom line is that you have to be focused on both preventing and confronting fraud. Many business owners don’t think it will happen to them, and because they have so many tasks and issues on their plate, they often neglect this aspect of the business. Fraud should be addressed early into the business before it is too late.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.