India tops a new survey of 42 countries by Britain’s Centre for Retail Research on the levels of retail “shrinkage” (losses from shoplifting, theft by workers and accounting errors), according to an Economist article. Goods worth 2.72% of sales went walkabout. In Taiwan, the best performer, only 0.87% did. 

Globally, shrinkage cost retailers $107 billion in the year to June. This was 5.6% less than the previous year, but still the equivalent of 1.36% of sales. In America, light-fingered employees are a bigger problem than thieving shoppers. In Europe, it is the other way around. Worldwide, crooked staff have better opportunities to steal than ordinary shoppers. Per incident, they pinch ten times more.

The conclusions on employee theft in America are striking because it is the small and mid size business that is most at risk from this type of criminal activity.  American business spends tens of millions of dollars each year on security as it attempts to hold on to its money, equipment, and trade secrets. There is good reason for this extraordinary investment - corporate fraud experts estimate that 95% of all companies get ripped off by their employees. But even with all the sophisticated techniques, procedures and controls, it may be that more than 90% of fraud goes undetected.

The loss estimates range from $10 billion to $40 billion, but these figures are more guesses than estimates. No one knows the actual cost of employee fraud to the nation's businesses each year.

Most business owners and managers do not want to believe that trusted employees are capable of stealing on a regular basis. They cannot bring themselves to believe that the employees they hired would do this to the company. The employees sense this is the way management feels, which again makes stealing easier. Even when presented with proof, such as a video record of an employee stealing, many employers cannot believe what they are seeing - actual cash shortages or inventory shrinkage. "Sally has been with us for fifteen years. She wouldn't do this."

One of the most cost-effective ways to deter fraud is to have an experienced financial manager who regularly reviews your financial situation, asks penetrating questions and makes sure your financial house is in order.