The Importance Of Internal Controls In Small Businesses

Internal Controls - Complete Controller

No matter how big or small your business may be, employee theft will continue to eat a significant portion of your annual revenues and profits. It is something that has been around since the beginning of time. No one can deny that businesses are vulnerable to fraud, primarily SME entities who suffer excessively huge fraud losses. SMEs need to ensure adequate internal controls to create a favorable environment for yielding profits. Although, you may believe that fraud cases are found in large-scale companies with thousands of employees in multiple locations. Check out America's Best Bookkeepers

SMEs are vulnerable to employee fraud

Today, organizations have mixed opinions on how to deal with cases of fraud. Some are proactive and instill policies for prevention; some are lenient and show more sympathy towards their employees on personal grounds. According to studies, organizations with fewer than 100 employees are more vulnerable to employee fraud as they account for the highest percentage of fraud. The thing is, SMEs are more inclined towards generating sales and profits and care less about maintaining adequate internal controls and reviewing their bookkeeping records with a fine-tooth comb. Each year, SMEs lose billions of dollars in annual revenues and profits worldwide, claiming that employee fraud is inevitable and hurts a business’s integrity. Check out America's Best Bookkeepers

You can prevent fraud

With innovative tools, techniques, and practices, fraud prevention, and detection are possible. It would help if you chose the right prevention option by making a comprehensive analysis of your business. No one knows a business more than its owner, and owners have the potential to change the fate of their company. They know their business’s strengths and weaknesses and can turn things around in their business’s favor. In organizational setups, SMEs have scarce resources in which they need to ensure whether everything is in control or not. Business owners need to know how to create and maintain internal controls by implementing a professionally designed fraud prevention and detection plan with limited resources.

Why do employees steal from their company?

There are primarily two reasons employees get involved in fraudulent activities in an organizational setup: undervalued and underpaid. These two things work as fuel for them and, if it is not there, the employees feel discouraged, demotivated, and left out. Moreover, you can only expect your employees to work efficiently if the owner ensures both things. When these two things are not there, the owners can expect their employees to be involved in fraudulent activities through various means. Organizations can catch up with their fading fate by creating, implementing, and practicing the proper internal controls. Check out America's Best Bookkeepers

Corruption ruins the business

Moral and financial corruption eats up an entire organization, slowly and gradually. Diminishing profit margins and draining profitability leads a business towards a complete disaster. Early on, owners who are eager to get their organization’s operations back to normal may have a slight chance of success. But those who react when the time has already passed achieve extraordinarily little or no success. Some organizations choose to hire professional managers who can turn things around on their organization’s behalf. Turnover seems like a wise choice, especially for those who are good at yielding sales and profits but lack managerial skills to maintain the proper internal controls.

We are maintaining adequate internal controls

Organizations need to prevent and detect fraud so that others working in the company are not bothered. By slightly modifying the existing organizational processes, companies can often overcome business challenges in an effective manner. Sometimes they are successful. Sometimes they fail. It all depends on how well you leverage your internal controls. For a typical company, separation of duties is a critical tool that helps evaluate performance individually. This way, you get to know whether your employees are stealing from you or not, and, if they are, you will know who is stealing!

Additionally, it would be best to make sure that your employees abide by the policies and procedures. Encourage your employees to document everything to know what is lacking or where the problem is precise. These are some of the ways by which you can maintain proper internal control in your organization.

Check out America's Best Bookkeepers 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-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure 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. Check out America's Best Bookkeepers