On average, a fraud scheme takes 14 months to detect and results in $1,509,000 in losses. One way to protect your organization from these losses is to know how to recognize the most common types of business fraud and how to investigate them effectively.

The Impact of Business Fraud

Research has shown that fraud doesn't discriminate by industry, employer size or geography. A Global Fraud Study conducted by the ACFE (Association of Certified Fraud Examiners) found that in a typical year, a business loses an average of 5% of income due to fraud. The total dollar amount of losses worldwide comes in at a staggering $3.7 trillion annually, according to anti-fraud experts.

Additionally, there are other hidden costs including low morale issues, tarnished brand images, negative PR, low productivity and much more, that go way beyond the actual dollar amount of the fraud itself.  It is important to take active steps to investigate, avoid and mitigate the impacts of fraud.

What are the Types of Business Fraud?

In order to combat and investigate corporate fraud, it helps to understand the various types. The most common types include:

• Cybercrime and identity theft (specifically credit card abuse) – These generally impact small businesses the most, but a financial hit from this type of fraud can happen to a business of any size.
• Financial reporting fraud – This usually includes over- or understating revenue, earnings and assets. This is usually an internal type of fraud.
• Asset misappropriation – This is a very common type of fraud and it usually includes skimming cash, which can be very difficult to track and uncover. It can also include payroll or invoice frauds.
• Intellectual property (IP) theft – Stealing intellectual property has been on the rise since current technology has made it much easier to steal company and trade secrets. Outsourcing has also made it easier to steal intellectual property.
• Insurance fraud – This is commonly known as workers’ compensation fraud when the fraudster is an employee. Insurance fraud can also occur when you have customers who are injured on your premises. The fraud comes in when the claim of an injury is not valid or has been greatly exaggerated. This type of fraud means you must gather physical evidence as proof of the victim's physical condition.

RELATED: How to Conduct a Fraud Investigation: The Complete Guide

If you suspect that your business is experiencing any kind of fraud, the best practice is to begin your investigation quickly and conduct it as thoroughly as possible.

Want to learn more about the different types of business fraud? Download this free cheat sheet for a handy resource you can print and reference anytime.