The True Price of Fraud for Business
8/25/2022 - By Wes Duncan - Manage Your Business | Small Business Resources

What is Business Fraud?
Business fraud can occur once and cost a company millions or take place over years with the same result. A savvy employee with the right credentials can embezzle funds through fake payroll, falsified inventory records or other means.According to the Association of Certified Fraud Examiners 2022 report, the typical fraud can last up to 12 months and cost an average of $117,000. Industries with the most reports of corporate fraud include construction, real estate and utilities.
Fraud can begin from within or without a company, from employees, customers, or suppliers. It most commonly occurs with employees working in operations, accounting, sales and upper management.
Different Types of Fraud in Business
1. Asset Misappropriation
As the name suggests, asset misappropriation happens when an employee takes or misuses company assets for their gain. This type of fraud can look like simple theft or abuse of company goods or services. For instance, an employee uses company equipment for their personal use even if they never actually steal it.If the fraudster is clever, asset misappropriation can happen again and again until proper controls, such as strong asset and inventory management, are put in place. A company doesn’t have to be large to be a victim.
2. Forgery
Forgery often appears as falsified business or financial records. An employee may create fake records over time and use them to steal funds. They may also falsify official badges or identification to steal property or goods.3. Inventory Theft
Stealing goods for resale or personal use is known as inventory theft. Employees may accomplish this by changing inventory records or claiming to have lost documentation and receipts.
4. Account Fraud
Scammers can also come from outside a company. Business account fraud happens when a hacker gains access to bank accounts through malware, fraudulent emails (also known as business email compromise) or other means. They may try to make unauthorized purchases or transfers before account credentials are changed.5. Payroll Fraud
Embezzlement of company funds using the company payroll is called payroll fraud. An employee can steal funds by way of falsified timesheets, issuing unauthorized bonuses, or paying fictitious or terminated employees. Companies can even commit payroll fraud by misclassifying their employees to the IRS.6. Cash Theft
Also known as skimming, cash theft can occur a few dollars at time. This fraud is most common in a business that deals with a lot of customer payments in cash, such as restaurants and food carts. In some cases, a business owner will skim cash, since doing so reduces the reported profitability of the business, and therefore its income tax liability.7. Credit Card Scams
Businesses that hand out company credit cards for incidentals must keep a close eye on receipts and statements. An employee might be tempted to swipe their company card for something not related to their job. If they successfully submit an erroneous expense report, they may continue the practice.
8. Business Email Compromise
Business email compromise is a type of phishing scam in which fraudsters try to hack, spoof or impersonate business email addresses. They may change one letter or number in a familiar email address to make their scam appear legitimate.How to Protect Yourself from Business Email Compromise
Scammers send emails to employees, often those in payroll or accounting, in an attempt to gain credentials or convince someone to send a fraudulent wire.