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The F-Word of Business

Derek Peterson

Well I don't know what you were thinking but when I think of the business F-word, the first thing that comes to mind is FRAUD.

As a business owner or manager, have you ever suspected that fraud was happening in your organization?  In a recent article by Jeff Drew in the Journal of Accountancy, he cites the 2016 Report to the Nations on Occupational Fraud and Abuse saying, "...the typical organization loses 5% of revenues to fraud in a given year."  Think about what an extra 5% to your bottom line could do for you and your business.

According to the sources, asset misappropriation (a fancy term for stealing) is the most frequent form of fraud but at the lowest median loss.  Financial statement fraud was the least frequent but caused the highest median loss.

If you think that small businesses are immune because there are less resources to 'misappropriate' and would certainly not go un-noticed - think again.  The article explains that organizations with 100 employees or less are at higher risk and suffer the same size median loss as much larger organizations.  My question is, who do you think can sustain those losses easier?  It is exactly because small organizations have less resources that they are more susceptible to fraud occurring. 

Sounds horrible right?  Well there is some good news reported as well.  It is shown that internal controls and more specific anti-fraud controls make a significant impact in reducing the size of losses and the length of time that the fraud is being committed.  This can work in small businesses too. 

Take some time each year to assess, plan, implement and review your internal controls and other anti-fraud measures.  Each year, means repeat over and over.  There may be times (perhaps your first time now) that you need to dedicate more time and resources to this effort.  Not only are you less likely to experience fraud in your organization, but you will sleep better knowing that you have protective measures in place.  It will most certainly keep you from frequently using the business F-Word.