A recent report issued by the association of Certified Fraud Examiners places the cost of employee fraud at 7% of annual revenues. Employers with less than 100 employees saw a median loss of $200,000 according to the ACFE.
Another study performed by the Institute for Corporate Productivity and HR.com showed that 20% of all employers have some form of employee fraud. Both reports state that one of the contributing factors is the current economic downturn. Safe Harbor Insurance has all the tools to help identify the critical exposures and help design a fraud prevention plan and can provide employee dishonesty insurance to cover your business.
Here are some of the most common types of dishonesty claims:
- Theft of inventory– This is commonly known as shrinkage of inventory. It is not limited to just materials or goods, it also applies to office supplies and even office equipment.
- Vendor kickbacks– Employees set up over payments from vendors then receive payments in cash or in the form of goods, services, or trips.
- Padded expense accounts– Employees can pad expense accounts, use fake receipts and even purchase personal items.
- Embezzlement– Employees simply siphon off money from a business, by setting up fake accounts, stealing cash, or forging checks they deposit into their own accounts.
- Phantom vendors– Employees set up phony businesses and produce fake invoices. This can also be in partnership with a vendor that is paid for work not performed.
Fraud Prevention Suggestions
- Complete background checks on all employees
- Separate duties; split up check writing and deposit responsibilities
- Require two signatures on checks over $250
- Add a third person to reconcile books
- Have an outside firm perform an annual audit
- Hold employee training on policies and procedures
- Install video cameras in warehouses and parking lots
- Review your employee dishonesty coverage annually
Safe Harbor Insurance has access to the insurance companies that can provide the correct coverage at competitive pricing.