Viewing entries tagged
Cash Management

Internal Theft and Loss Prevention

The risk of internal theft is a grievous reality for most revenue-generating businesses within any modern industry. Employee dishonesty is a major concern for retail organizations of any size that often results in crippling losses, particularly for up-and-coming small businesses.

According to ACFE’s 2014 Report to the Nations, an annual publication detailing world-wide fraud and abuse, 85.4 percent of all studied fraud cases are the result of asset misappropriation (for the purposes of cash-handling businesses, this includes cash larceny, skimming, theft of cash on hand, and the like). In a sample size of nearly 1,500 cases of fraud, 48 percent of them occurred within the United States.

Notable points from the study:

  • 77 percent of frauds involve persons in seven departments: accounting, operations, sales, executive/upper management, customer service, purchasing and finance.

  • Only 14 percent of businesses made a full recovery from losses due to fraud.

  • Banking and financial services, government and public administration, and manufacturing industries maintain the greatest number of fraud cases reported.

  • Small businesses are disproportionately victimized and under-protected by anti-fraud measures, making them especially vulnerable.    

Keys to loss prevention:

  1. Be aware of the warning signs of fraud and internal theft - Employees with a propensity for dishonest practices share a distinct set of identifiable characteristics. These can include immediate lifestyle changes (expensive cars, clothes, etc.), sizable personal debt, and behavioral changes related to drug or alcohol abuse.   

  2. Be thorough in hiring practices and background checks -  Drug screening, reference checks, credit checks, and criminal background checks play a significant role in reducing the risk of fraud.

  3. Implement a fraud reporting mechanism - Hotlines, a method for employees to hold others accountable, are statistically the most effective means of fraud prevention. Fraud instances within organizations implementing hotlines were 41 percent less costly and companies detected problems 51 percent faster.

  4. Establish a culture of integrity - Check to see if fraud prevention goals are met and if the organization has established a process for the oversight of fraud risk. Educate employees about the cost of fraud and constantly evaluate to see if their job performance expectations are realistic.