This is the second post in a four-part series on employee theft.
As the economic recession churns on and countless Americans struggle to get some control over their mounting debt, incidents of employee theft and fraud are becoming more and more common. The FBI even calls employee theft “the fastest growing crime in America,” and this trend is having a devastating effect on small businesses.
Although employee theft may immediately be associated with pilfering inventory or stealing cash, there are actually several ways that employees can steal from their employers. The Boston Globe and Denver Post recently reported that U.S. companies lose nearly $400 Billion per year in lost productivity due to loafing (“time theft”). Some of the more sophisticated examples of employee theft include: conducting shipping and billing scams, forging receipts, faking an injury and claiming compensation, and putting fictitious employees on the payroll.
The Association of Certified Fraud Examiners (ACFE) in its Report to the Nation on Occupational Fraud & Abuse recently estimated that the typical business will lose an average of six percent of revenues from employee theft. The report also indicates that small businesses are especially vulnerable to occupational fraud since they generally have the limited resources to devote towards crime detection. The average loss suffered by businesses with fewer than 100 employees was $200,000, which was significantly higher than the average loss in any other category, including the largest businesses.
Moreover, a U.S. Chamber of Commerce survey recently reported that a staggering one-third of business bankruptcies are attributed to employee theft.
Employee theft often goes beyond loses in time, money, and resources, it can also tarnish a business’ reputation as a provider of quality products and service. At a time when every dollar, and every customer counts, the way a business responds to incidents of employee crime may make the difference between staying afloat and sinking.