Small businesses most vulnerable to payroll fraud.(Communique)

Small businesses are often the most vulnerable and easiest targets for occupational fraud and abuse--and particularly payroll fraud, according to Fiducial, an international provider of professional business outsourcing. "Many small businesses think they are less likely to experience insider theft, like payroll fraud, simply because they are small, often friendly little businesses," said Eric Myers, manager of Fiducial's payroll processing center and a Certified Payroll Professional (CPP). "But unless the owner handles all aspects of computing and paying the payroll, there is room for fraud in event small business."

Fiducial's first-hand experience with small businesses is backed up by national statistics from the Association of Certified Fraud Examiners. According to ACFE's "Report to the Nation on Occupational Fraud and Abuse":

* More than 39 percent of the cases of fraud occurred in businesses with fewer than 99 employees;

* Payroll fraud schemes accounted for nearly 10 percent of the $600 billion lost to fraud last year;

* Small businesses pay an average $127,500 in fraud losses per incident, while large companies' losses average $97,000 per scheme.

Among the reasons that small businesses are so vulnerable, Myers said, is their basic lack of accounting controls. "Small companies often have a single employee who writes and signs all company checks, manages and reconciles the bank statement, handles the payroll taxes and keeps the company's books," said Myers. "This puts significant financial control in the hands of one person who may be overworked or lack the specific skills needed to do the job."

The number one complaint Fiducial hears from small business clients is that they are drowning in a sea of back-end office functions like payroll, and often miss the red flags, according to Myers. So how do small businesses recognize payroll fraud techniques and avoid ...