Embezzlement is the theft or misappropriation of funds placed in one’s custody. In other words, it is stealing something from an organization that is not yours. Regardless of the scale or magnitude of a business, embezzlement of funds exists in almost every organization. Therefore, you must come up with a prevention plan before it drains your small business.
Employee fraud and embezzlement can occur in any organization. Small businesses often lack experience and knowledge, which prevents them from having the right checks and balances in place. According to studies, businesses lose approximately 8% of their annual revenues from theft and embezzlement, making it the biggest reason why most start-ups fail to create an impact. Employees can make or break a business. They have the potential to take a business to the top or break it apart to pieces. Employees can determine the fate of a company, and it’s long-term survival.
Employee embezzlement can drain your small business, perhaps making you lose everything within a short period. The portion of assets that an employee steals each month accumulates to a huge amount, which eventually leads a business towards its gradual demise. Stealing from an employer raises serious moral and ethical concerns; it’s not a legal activity under any circumstance. Moreover, it may lead one to face serious repercussions such as lawsuits and jail time.
Embezzlers can often get away with their actions because they are smart and steal at a suitable time of their choosing. They know their organization’s processes and have a clear picture of how to steal without getting caught. However, with increased technology and advanced accounting software, now you have options to prevent maximum leakage or data theft in your company. Below are our suggestions on how to stop embezzlement before it drains your small business.
Look For Financial Discrepancies
An unusual fall in profits or a squeezing profitability index are symptoms of embezzlement. By keeping a highly advanced system in place, you can prevent embezzlement or data leakages. In doing this, you will get to know your profit shortfalls and even catch culprits for further disciplinary actions.
Regularly Check Company Records
No matter how much you trust your accountant, you should always regularly check your company’s financial records to obtain a clear picture of the finances. Any discrepancies found in the records should be taken care of wisely. Financial books and bookkeeping records reveal the true status of a company’s finances.
Respond to Client Complaints
This is one of the major ways to find out if embezzlement is occurring in your organization. Clients often complain when their order is not dispatched properly or doesn’t justify their expectations. Therefore, if you start to receive many complaints, it is wise to look into the matter. It may show you if something suspicious is happening.
Notice Employee Habits and Behavior
Pay attention to any significant changes in the habits and behaviors of your employees. To stop embezzlement before it drains your business, you need to develop a mechanism that may discourage employees from participating in such malicious and unethical deeds.
Leverage Control over Financial Decisions
In the core of every successful business lies well-established and ethical teamwork. You can’t expect to excel all alone. You need to empower your team to help with the prevention of fraudulent activities. Although most organizations are affected by this disease, you need to develop suitable preventive measures to stop and save your organization from embezzlement.
Leverage control over your organization’s finances to establish your leadership over all aspects of your business, especially related to financial decision-making. Stopping embezzlement in its tracks is extremely important for winning the competitive business race.
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