'Tis The Season .... For Stealing?

There is a direct correlation between tight financial times and the probability of your business suffering a loss due to employee theft. Whether the catalyst is the economic recession or an upcoming holiday, financial pressures on the family budget could put your company at risk.

The median loss for privately owned companies is $231,000 according to the Association of Certified Fraud Examiners (ACFE). Isn’t my company too small to be a target? The reported median loss for businesses with less than 100 employees is $155,000 and small businesses represent 31% of all victim organizations!

So how do I know if my company is at risk? Employee theft tends to occur in situations where the person is having financial difficulties (36%), has the opportunity and access (22% worked in the accounting department) and believes the chances of getting caught are low (detection time on cash thefts is between 17-30 months).

My bookkeeper has been with us for 10 years, doesn’t that mean my company is safe? Over 50% of perpetrators have worked for their employer for at least 5 years. However, the longer the person was employed, the greater the reported loss amount. Employees holding positions for 6-10 years stole and average of $231,000. 50% of perpetrators were over the age of 40 and the majority (33%) were between 41-50 years old.

So what should I look for? Billings to fictitious vendors, check tampering (forgery or alterations), cash related thefts, product related thefts, and payroll frauds (payment to fictitious employees or double paychecks to actual employees) are most commonly see in small businesses.

How can I protect my company? The key to deterring employee theft is good internal controls. The problem some businesses face is there simply aren’t enough employees to make implementing the controls possible. Surprise audits are the most effective tool for deterring and detecting employee theft, but how many companies can afford to keep an internal auditor on payroll?

It’s not always possible for the business owners to handle every piece of operations, but it’s a good idea to get more involved with high-risk activities (verifying cash receipts, making deposits, reconciling bank accounts, checking purchases and inventory) on a consistent basis or to obtain the assistance of an independent CPA.

How can I make my controls better and my company safer? Every business is different, but there are several simple controls that can be implemented for little or no cost.  Contact us today for a free consultation and a little more peace of mind.

cmealey@songincpa.com or (716) 630-0600 x 208