The Shelby Report: Occupational Fraud Translates to Big Losses for Small Businesses

Last Updated on April 8, 2019 by G. T. HR

HR & Benefits News is a monthly column by Chris Cooley, co-founder of MyHRConcierge and SMB Benefits Advisors.

According to the 2018 Global Study on Occupational Fraud and Abuse performed by the Association of Certified Fraud Examiners (ACFE), occupational fraud schemes drain business owners around the world of billions of dollars in revenue each year. The ACFE Report to the Nations is released every two years and addresses the warning signs of fraud, the types of fraud most often committed, case examples showing areas where small businesses are susceptible to fraud, and the most effective ways business owners can combat fraud.

The true cost of fraud for independent grocers and other SMBs

Many people might assume that larger businesses suffer more from fraud schemes, but the research shows that businesses with fewer than 100 employees lost almost twice as much per fraud scheme as companies with 100 or more employees. In the 2,690 cases of fraud that were examined in the 2018 Report to the Nations, the median loss per fraud scheme for companies with 100 or more employees equaled $104,000, as opposed to a median loss of $200,000 reported for companies with 100 or less employees. This disproportionate loss is most often attributed to smaller businesses having fewer resources, less time to investigate employees’ actions and fewer internal controls. Weaknesses in internal control systems were responsible for nearly 50 percent of all frauds.