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Did you realize that a typical organization loses up to 5 percent of its annual income to fraud? This information is one result of an annual survey of Certified Fraud Examiners conducted by the Association of Certified Fraud Examiners. As reported in the video below, these losses could be very harmful to small businesses.

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The ACFE, which is the world's largest anti-fraud organization, found that corruption and billing schemes were the leading types of fraud in the U.S. and the rest of the world. Unfortunately, the study also found that small businesses are especially vulnerable to fraud.

Thankfully, there are ways in which it can be avoided. First of all, businesses can implement detection systems. One way to do this is through internal and external hotlines. These hotlines could be in the form of phone lines, email accounts, or both. However, they should ensure that tipsters are kept both anonymous and confidential.

Audits are another way to prevent fraud. While audits are helpful, many businesses depend solely upon them to detect fraud. The best audits for businesses to use are surprise audits because perpetrators act when they think they will not get caught. If businesses integrate surprise audits, the chances of fraud will likely be reduced.

Thirdly, businesses that enforce an ethics policy are less apt to have fraud. If management acts ethically and rewards ethical behavior, employees will be encouraged to follow suit.

A fourth way avoid fraud is through education. Employees should be educated on not only how to detect fraud, but also on the potential impact of fraud on the entire company.

Last but not least, monitoring systems are beneficial to businesses in the fight to prevent fraud. Constant monitoring is important for early detection of fraud. In addition, if employees know they are being watched, they would be less likely to commit fraud.

Occupational fraud, also known as employee fraud, is very real and can be extremely harmful. For this reason, it is important for small businesses to put safeguards in place to prevent it from happening.

What tips do you have for avoiding employee fraud?