Understanding the Real Cost of Fraud for a Business

It is undeniable that fraud can happen to anyone, including businesses big and small. When it is discovered that you or your business was a victim of fraud, accepting that fact and finding out that someone you trusted chose to steal from you is definitely challenging to deal with, not just financially but emotionally as well.

Anger typically follows the discovery and acceptance phase followed by feelings of grief, putting a strain on employees and the management thereby affecting the health of the entire organization.

How Fraud Affects Victims

Since we’re talking about fraud in the business sense, let’s look in to the possible effects of fraud when a business owner finds out that a trusted employee has been stealing from the company. Say a bookstore owner whose business is going bad discovered that an employee has been stealing books from the store. Then it was found out that the stolen books were donated by the employee to a good cause, a cause that the business owner fully knows his employee his passionate about because they’ve known each other for years beyond just work. How will this affect the business owner?

For one, there is a huge financial loss, more so for a business that is already struggling. However, there is also some moral dilemma considering that the stolen goods were used for a good cause, something that the business owner was aware his employee cared deeply about.

Asset misappropriation such as the case described here consists 89% of all cases of occupational fraud according to the Report to the Nations (ACFE). The loss from these types of crimes has a median value of $114,000, a huge loss that can make a small business go under.

In this case, the cost of loss over the years wasn’t more than a few thousand dollars but that amount could have meant life or death for a small business. To find out all the details of the fraud, private investigators were hired and an accountant and an auditor were paid to go over the company’s finances, almost doubling the cost of the theft.

The impact of this fraud for the business owner goes beyond financial loss. How can he trust his other employees when the one he trusted the most and thought of as a good person stole from his business? He may have to investigate deeper to find out if other employees were involved in fraud too, especially because his business is not doing good; which could have been a direct result of employees stealing.

The work environment will suffer as well. Everyone would be subject to suspicion and people will try to get out of a sinking ship, even if they did nothing to cause problems.

What to Do to Save the Business

When this happens, it is important for the business owner to talk with other employees and keep communication lines open to prevent further deterioration of the work environment and to help save the business. When investigations are ongoing, it is important for the other employees to be reassured that they won’t get in trouble unless they were also employed in occupational fraud.  The faster and more efficient the investigations are done, the easier it will be to go back to business and for the organization to hea and recoverl.

Are you dealing with theft or occupational fraud in your business? Hire our private investigators to find out the truth and help you devise ways on how to prevent fraud. Contact us at Haywood Hunt!

Summary
Understanding the Real Cost of Fraud for a Business
Article Name
Understanding the Real Cost of Fraud for a Business
Description
It is undeniable that fraud can happen to anyone, including businesses big and small. When it is discovered that you or your business was a victim of fraud, accepting that fact and finding out that someone you trusted chose to steal from you is definitely challenging to deal with, not just financially but emotionally as well.
Author
Haywood Hunt & Associates Inc - Toronto & Mississauga Private Investigators