Understanding How Fraud Can Affect Your Business

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Fraud is an unfortunately common enemy of businesses of all sizes: the most recent report into fraud by the Association of Fraud Prevention (ACFE) found it cost businesses a median of $150,000 with the average organization losing some five per cent of its revenue to fraudulent activities.

Fraud can affect businesses in various ways, the chief one of course being financial, and fraudulent activity can range from activities such as deliberately claiming more hours worked on a timesheet, to major frauds involving money theft sometimes over a longer time frame.

Fraud prevention

Technology can be used and procedures put in place to help combat fraud. For example, advanced tamper proof security checks can address this particular fraud method commonly seen in smaller businesses, and various spot audits and data analysis can offer procedural fraud detection.

Fraud can cause problems in business in the following ways:


Most fraud involves directly or indirectly the theft of money whether through actual theft or abuse of time and irregular use of equipment.

The money lost while a fraud is being perpetrated has an obvious effect, but then there’s the costs of ‘clearing up’ after and perhaps instituting fraud prevention measures such as the use of Fraud Monitoring Tools.


If your business has fallen victim to a major fraud, it can have a detrimental effect in the eyes of your actual and potential customers. There have been various high-profile frauds at major companies that unquestionably tarnished their reputations.

The longer term effects of fraud in terms of loss of goodwill and cold, hard cash in lost business can last well into the future and take considerable hard work to correct.

Accounting and capital

Your costs to audit your accounts could well increase as extra checks may be needed to ensure you’re fully recovered from a fraud episode and your accounting systems are efficient.

Attracting funding could be diminished as lenders could be put off by news of recent frauds in your business.

Company morale

Fraud can have a devastating effect on company morale in various ways:

Culpability – if someone in a team has been discovered conducting fraudulent activities, it’s possible their immediate work colleagues may feel guilty for not detecting anything amiss.

Management fraud – if it’s revealed that management or those in senior positions have perpetrated a fraud, then trust in the organization amongst the workforce at large can be severely diminished.

Trust is important in business, but so too is responsible checking up; a ‘trust and verify’ method is worth pursuing to control staff activities to protect against fraud while not making staff feel they’re considered untrustworthy.

Digital disruption

The more companies embrace technology the more the risk of fraud rises; tech has advanced to the point where even the smallest business may have sophisticated IT systems vulnerable to fraudulent activities.

When a fraud is detected or suspected, then it can have a very disruptive effect on the business’s digital activities. In the worst case data could be lost or compromised, new systems may need putting in place to combat the threat or recover once it’s been detected, and maybe a whole new business strategy may be required along with an overhaul of security.

This could involved wholesale staff training and lengthy audits by digital experts possibly causing loss of productivity.

Fraud can happen to any business

Businesses of all sizes can be susceptible to fraud – indeed, a smaller business may be more vulnerable than a larger one as they don’t tend to focus as much effort on fraud prevention. Using resources from the ACFE to better understand the risks and taking steps to eliminate our at least reduce them is worth while.

About the Author

Debbie Fletcher is an enthusiastic, experienced writer who has written for a range of different magazines and news publications over the years. Graduating from City University London specialising in English Literature, Debbie’s passion for writing has since grown. She loves anything and everything technology, and exploring different cultures across the world. She’s currently looking towards starting her Masters in Comparative Literature in the next few years

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