According to a 2006 report by the Association of Certified Fraud Examiners (ACFE), organizations are estimated to lose 5% of their annual revenues to occupational fraud¹.

Small businesses seem most vulnerable to occupational fraud.  The ACFE Report reveals the average fraud within a small business results in a loss of approximately $127,500.  The average fraud in large companies result in approximately $97,000 in losses.  Small businesses are impacted greatly because they generally have limited internal controls and and are not proactive in detecting fraud¹.

Fraud is reduced by:

Creating a culture of honesty, openness, and assistance

Eliminating opportunites for fraud

Establishing internal controls

Discouraging collusion between employees and outside parties (vendors)

Creating an effective management policy to minimize fraud

Questions the Small Business Owner Should Ask Themselves:

1.  What is my hiring policy?

            a. Do I ask for and check up with a potential employee’s references?

            b. Whom am I attracting?

2.   What am I teaching my employees?

            a.  Do I have an ethics or policy statement against fraudulent activity?

            b.  Are my employees aware of such a document?

            c.  How do I encourage honesty?

3.   What is my organizational structure?

            a.  Do employees know who to go to if they see something is amiss?

            b.  Do I have someone assigned to randomly audit our books?

            c.  Do we have a positive work environment?

4.   Are our assets secure?

            a.  How is our cash managed?

            b.  Is our accounting system secure?

            c.  Do we have appropriate segregation of duties?

5.   What are our internal controls?