The National Science Foundation has awarded a $150,000 Small Business Innovation Research grant to accounting record analysis software company AuditMyBooks to assess the feasibility of predicting fraud in small businesses. 

The research proposal suggests that fraud prediction may be possible by analyzing small-business financial data with advanced statistical analysis. It also will enable AuditMyBooks to extend its current Analyzer product line, which automatically scans accounting systems to detect errors and fraud.

The Association of Certified Fraud Examiners estimates that organizations lose 5 percent of their revenues to fraud, and companies with less than 100 employees represent more than 30 percent of all fraud cases. ACFE research also shows that small and midsized businesses suffer the highest median losses of any sized company at nearly $150,000 per occurrence. 

“In many cases, businesses affected by fraud are forced to lay off employees, stop payments to suppliers, reduce quality levels or cut other vital spending in hope of recouping losses,” said AuditMyBooks chief executive Steve Bachman. “In the worst cases, companies may even be forced to close.”

The NSF SBIR Program aims to increase the incentive for small firms to undertake scientific or engineering research with a great potential economic payoff. SBIR grants are a form of R&D funding provided by 11 agencies of the federal government.