Employee Fraud Is More Common Than You Think

It’s important to build a team you can trust, but unfortunately employee fraud is common. Pre-employment background screening is a critical tool in reducing the risk of hiring the wrong person. Here’s a story worth reading with some of the things to look out for in terms of employee fraud:

A business owner I know was seeing a slight decline in his gross revenues and gross margins last year at three of his five retail locations. He couldn’t understand what was going on. So he installed an enterprise resource planning system including a point-of-sale inventory management system. He hoped that these new systems would isolate the problem and improve his company’s profitability.

But things didn’t change. Product margins were less than expected; product sales were flat; cost of goods sold were inconsistent; and, the inventory analysis never reconciled with the company financial books and records. Something was radically wrong. The business owner contacted a management consulting firm for help. After an extensive review, the firm found that the company was a victim of fraud. Someone or several employees were embezzling money through misappropriation of assets.

That business owner isn’t alone. According to the Association of Certified Fraud Examiners, nearly 40 percent of fraud occurs at privately held companies and 30 percent occurs at companies with fewer than 100 employees. The association estimates that fraud causes average revenue losses of 5 percent annually.