According to a recent study by the ACFE (Association of Certified Fraud Examiners), U.S. organizations lose 7% of their annual revenues by fraud. The median loss caused by occupational frauds was $175,000 however the median loss for small businesses (those under 100 employees) was $200,000. Check tampering and fraudulent billings were the most common small business fraud schemes.
While most employee dishonesty usually involves the taking of money, it can also be the theft of property such as equipment or stock or even allowing unauthorized discounts on merchandise to friends. Small businesses can be especially vulnerable to Employee Dishonesty due to a lack of sufficient internal controls. The following are some recommendations that may help your business avoid a loss:
- When hiring new employees, check references, do personal interviews and obtain background checks.
- Divide responsibilities for accounting and purchasing functions. For example, have one employee who does the ordering and another who checks receipt of items and approves them for payment.
- Control check signers and require two signatures on checks over a certain amount.
- Require approval for any adjustment of the accounting books
- Schedule regular inventories
Employee Dishonesty Insurance may also be referred to as a Fidelity Bond. It can be purchased on a stand alone basis or within a Crime Policy that can provide other coverages such as Forgery or Alteration, Computer Fraud, Funds Transfer Fraud, Computer Crime, Employee Theft of Client Property and On/Off Premises Coverage for money, securities and other property.
To learn more about this valuable coverage, please contact one of our professionals at HWP Insurance for your San Diego insurance and Riverside insurance needs.