Internal fraud is a significant problem faced by organizations today, and most companies don’t even readily admit that their business may be vulnerable to employee theft or fraud. Gone are the days when it used to be a rare thing. It is an everyday activity, causing businesses to lose billions of dollars in annual revenues and profits. According to a report published by the ACFE (Association Of Certified Fraud Examiners), organizations lose a significant 9% of their revenue due to fraud each year. It indicates that a substantial portion of annual profitability is drained due to this curse, and businesses need to develop a fraud prevention plan to secure their invaluable assets.
You Cannot Blindly Trust Your Employees
With the right technological tools and techniques, fraud prevention is possible. However, it would help if you devised an effective plan to reduce fraud or employee theft in your organization. Initially, businesses had the margin to trust their employees almost entirely due to the long-term faith and trust developed on personal and professional grounds. Now, businesses cannot trust their employees as they used to. Why? People have lost morality and faith and would exploit the business they might be working in as much as possible and hold onto any opportunity.
Maintaining Effective Internal Control
Organizations need to maintain effective internal control for the prevention of fraud. Fraud is devastating for a business, both financially and culturally. Business owners who ignore fraud cases in their organization will face repercussions in the form of losing their competitive advantage, growth, and working capital. Employee fraud has many forms, and roughly three major categories reveal how employees steal from their company.
They include corruption, asset misappropriation, and financial statement fraud. If an organization successfully maintains effective internal control, it can significantly reduce employee fraud. Preventing fraud is not as complicated as it seems; it takes awareness of your staff’s mentality and the proper practices to avoid it.
Poor Internal Control Is Costly To Businesses
Using the right tools and techniques can significantly reduce the percentage of employee fraud. Prevention of fraud is only possible when it is done right. Poor internal control is one of four primary reasons why any fraud occurs. The other three include collision between employees, personal rifts between employees and third parties, and management overriding internal controls. If you expect to prevent fraud and eliminate fraud risks, you must design an internal control to deter fraudulent activities.
What Comes Under The Banner Of Effective Internal Control?
Before creating an effective plan for preventing fraud, you need to define your company’s culture and how your business is governed. You need to assess every employee to know them well. Educate your employees by integrating various interactive methods in which every employee must participate. Once the training is finished, remind your staff to uphold standards to ensure continued growth and success. Lastly, it would be best if you documented everything without errors to ensure that employees understand the code of conduct and theft prevention policies.
Building solid relationships and communication with your employees is crucial for a company’s growth and success. The prevention of fraud can be possible when you maintain strong interactions and communication with your employees. Moreover, segregation of duties is one way by which you can track your employee’s productivity and performance. The employees who dare to steal from you can be traced easily when roles and duties are assigned. Bookkeeping records can reveal who is stealing from you; it takes effective monitoring and tracking.
In conclusion, the pervasive threat of internal fraud demands proactive measures. Organizations must acknowledge the prevalence and implement robust internal controls. With practical strategies, including staff awareness, training, and documentation, businesses can safeguard against the devastating impact of fraud. Employee trust must be tempered with vigilance, as poor internal control proves costly. By fostering a culture of integrity, implementing segregation of duties, and maintaining open communication, businesses can fortify themselves against fraud, ensuring sustained growth and success.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud platform where their QuickBooks™️ file, critical financial documents, and back-office tools are hosted in an efficient SSO environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.