Employees are stealing billions of dollars from their U.S. small business (SMB) employers every year, according to new data from Statistic Brain and reported in CNBC this week.
According to Statistic Brain, employee theft amounts to $50 billion every year — 7 percent of annual revenues. A whopping 75 percent of employees have reportedly stolen at least once from their employer, and more than two-thirds have stolen more than once.
A third of SMB bankruptcies are the direct result of employee theft, Statistic Brain added.
News reports in HSBC on Tuesday (Sept. 12) highlighted the findings in conjunction with separate research from Hiscox, which found that businesses of all sizes lost an average of $1.13 million each due to employee theft last year. Small businesses made up 68 percent of those cases, the research found, with median losses weighing in at $289,864 each.
“It can be incredibly devastating to find out they have been ripping you off,” said Hiscox Crime and Fidelity Product Head Doug Karpp in an interview with the publication.
Hiscox data found that vendor fraud is the most damaging scheme, totaling more than $50 million in losses, but funds theft and check fraud are the most common crimes.
However, small businesses are unaware of the threat, with just 1 percent saying crime and vandalism is the “most critical issue” for the company, according to a CNBC Small Business Survey.
Hiscox researchers did note that there are signs business owners can look out for to detect employee fraud and other schemes. They include employees making extravagant purchases, for instance. But often, embezzlers can be difficult to detect, Karpp explained.
“They are diligent and ambitious. They come in early. They are working late. They never take a vacation,” he said. “A lot of cases get discovered when the employee is on vacation.”
“If you end up terminating the employee, you should press charges and publicize it within your company,” he continued. “That will show employees that you take fraud seriously and help repair any damage to company culture that exists when employees are found stealing.”