WORKPLACE THEFT HITS SMALL BUSINESSES THE HARDEST

Jan 1, 2006 12:00 PM

Disbelief is a common reaction when a trusted employee, manager or owner steals from a small business. But experts say the trust level in smaller businesses and organizations makes them ripe targets for internal thievery.

While multimillion-dollar corporate embezzlements make headlines, it's churches, schools, clubs and mom-and-pop shops that have the hardest time recovering their financial footing, the St. Paul Pioneer Press reports.

“For the typical small business, it's not common. But it's traumatic when it happens,” says Neal T. Buethe, a Minneapolis employment lawyer.

Here are some recent findings from a study by the Association of Certified Fraud Examiners, a national group that looked at 508 U.S. occupational fraud cases:

• Companies with fewer than 100 employees suffered the greatest losses, second only to businesses with more than 10,000 employees, with a median loss of $98,000.

• More than a third of frauds were committed by managers, while 12 percent were done by owners or executives.

• Most fraud perpetrators are first-time offenders.

• Most frauds came to light through tips from other employees or internal audits. But more were caught by accident — say, an employee noticing surprising bank statements while filling in for a co-worker — than through day-to-day, internal controls. And that's especially true for smaller businesses.

• The most common frauds included skimming revenue before it's recorded, stealing inventory, billing schemes, doctored invoices and payroll tampering

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