There is certainly no denying the fact that businesses fear embezzlement, fraud, and theft. According to a studies, embezzlement eats up a significant portion of revenue and annual profits. It restricts companies in creating a high-level impact in the market which further prevents them from expanding their business operations. Statistics reveal that trusted employees steal more from businesses than other individuals or stakeholders in the company.
Top executives and business owners from around the globe have devised methods to protect their business’s from fraudulent activities. But, still, no one has yet come up with a magic formula to completely prevent the unfortunate reality. Employee theft and fraud are eminent. Employees’ opportunistic behavior often leads them to commit financial crimes causing companies a great deal of financial stress and trauma. A staggering 87% of embezzlement cases come from trusted partners and employees, which is worth contemplating.
Small Businesses Are More Vulnerable To Fraud
The media is filled with thousands of stories of serious fraud. This indicates that the life of business owners, especially entrepreneurs, is never easy. They have to regularly come up with different ways to protect themselves against embezzlement. Inexperienced business owners often lack the seasoned wisdom to make a distinction between their employees, especially those who are stealing. Those who have a habit of stealing are quite often smart, confident, and less concerned about losing their jobs, as they already know the repercussions.
Those who steal without the fear of getting caught can ruin a business entirely. Small businesses may be more vulnerable to fraud, but that doesn’t mean that nothing can be done to prevent embezzlement. Being a business owner, it is your duty and responsibility to maintain complete control over your finances and other important matters of your business. Developing a framework and streamlining operations requires you to know every fine detail. From bookkeeping accounts and bank statements to inventory and clients, you must know everything prior to making important business decisions. On top of all of this, unfortunately, you must be aware of the possibility of fraudulent activities in your business as well.
Protecting your business against embezzlement may be hard, but it is not impossible. Below, we have outlined how you can maintain complete control over your business and prevent cash, goods, and sensitive information from becoming the next case of embezzlement.
Know Your Employees and Notice Changes in Their Commitment
Sadly, your employees are a potential threat to your business because you never know who will steal from you. It could be a new employee just coming into the company or a trusted veteran. However, with minimal effort, you can prevent a lot of anguish. To protect your business against embezzlement, you must know your employees well. Things such as sudden changes in habit and behavior, a lifestyle above salary-levels, overnight shifts, strong objections to new accounting regulations, discrepancies in financial records, drugs, gambling, etc. may be warning signs of embezzlement.
Keep a Check and Balance System in Place
Obviously, it is hard to manage everything manually. It is more beneficial to create a custom solution tailored to your business needs in order to record, track, and analyze things wisely for better decision making. In layman terms, what’s going in and out of your business must be recorded chronologically in order to have a clear snapshot of finances and other important business matters. Keeping your personal and business accounts separate allows you to track personal and business expenses independently. This way, you will gain a true picture of your business, which will further prevent embezzlement.
Create a System to Report Theft or Fraud
A reporting system system needs to be very carefully incorporated into a business, as it shouldn’t signal employees as a sign that you don’t trust them. Losing the trust of your employees is hard to remedy. Therefore, you must keep all of the complaints filed by your employees confidential and secure from their co-workers. This way, employees feel more encouraged and safe in reporting fraudulent activities that they think might be happening. This will help you protect your business against embezzlement.
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