Skip to main content
Risk Management Bulletin


By December 3, 2013No Comments

Smaller companies tend to be more vulnerable than Fortune 500 corporations to theft by employees.

According to John Warren, general counsel for the U.S. Association of Certified Fraud Examiners (USACFA), losses from internal theft are disproportionately high among small businesses. A nationwide USACFA review of more than 1,100 fraud cases found that the median loss in organizations with fewer than 100 employees came to $190,000 – more than half again as much as the $120,000 loss among companies with 1,000 to 9,999 employees.

Check tampering was the most common scam uncovered by the survey, followed by skimming (the theft of unrecorded sales), faked billing, and phony expense reimbursements.

One reason why small companies take a bigger hit is because employee theft is often hard to detect and can last over several years. Most perpetrators aren’t hardened criminals, but rather longtime, trusted workers who have risen through the ranks. “It’s startling how many times people will say, ‘I’ve known this person for 10 years, they babysat my kids,’ ” says the USACFA’s Warren, ” ‘Out of all of my employees, I would have never guessed this.’ ”

Embezzlement usually starts small and then escalates, often triggered by money problems facing the worker. Says one expert, “Any time you have an employee who has financial difficulties, you have the makings of a problem.”

their vulnerability, many small businesses don’t take basic steps to deter employee theft. “There’s a reluctance to think about this, compared to larger companies,” notes Rich Simitian, Southern California managing partner for accounting firm Grant Thornton. “The attitude is, ‘I’ve got too many other things to think about as a business owner.’ ”

We’d be happy to recommend precautions that can help you deter fraud internal fraud.