Author: Complete Controller

Making payroll is perhaps the most essential task for a small business. Unfortunately, issues regarding payroll in small businesses are also common. Here are five common payroll problems and how to avoid them.

Hiring Out-Performs Income

Often, small companies will experience rapid growth, and a business owner can feel mounting pressure to hire more employees. A small business will not have had time to build up revenue to appropriately pay the added staff in some cases. Before reaching that point, the business owner should assess growing business activity and needs against the current payroll staff’s skills and workload. This will allow the owner to develop smart strategies to efficiently use the current human resources without over-extending payroll funds. Staff expansion should only happen after the business has built enough steady income to meet new employees’ required payroll.

Temporary Staff is Needed

You must know when to hire new staff, how to manage their payroll funding when the revenue builds up, and how to overcome expenses until your revenue is generated, which means temporary staff might be a good option. For example, if your business wins a project and you need more staff to complete the task before the deadline, you must increase your company’s payroll. However, a temporary project also increases the expenses of a company. This is a common scenario in construction companies, landscapers, and designers. Fortunately, this process is predictable and calculable, so prepare in advance and plan out finances and any other foreseeable issues. You can take money from your business’s last season or borrow money for payroll funding until the next season yields revenue.

Over-Staffing

At start-up, business owners often hire more employees than business needs require. New business owners can get in the habit of hiring staff for any new task that arises instead of efficiently dividing the work among the existing staff. Before hiring another team member, explore other options, such as outsourcing contractors, finding automated tasks to reduce the burden on the team, and reorganizing existing teams.

Delayed Payments or Discounts Given to Customer

Many customers delay their payments; however, if your small business runs short on income, you can quickly generate invoices and immediately send them to customers. This will help minimize any extenuating delay in receiving payments from your customers.

One incentive to receive payment quickly is to offer your customers discounts if the payment is made within a given time frame before the deadline.

Another option is to use Invoice Factoring for typically slow-paying customers. Invoice Factoring is when a business sells its invoices to a third party, known as a factor or factoring company, at a discount. This service can be provided by independent finance providers or even by banks.

Misconstruing Payroll Taxes

It is imperative that you carefully calculate your payroll taxes. Otherwise, the Internal Revenue Service (IRS) will notify you that you owe your employees money. This will naturally create payroll issues for your business and your employees.   However, it is essential to note that a taxpayer can request the Internal Revenue Service to negotiate payroll taxes for a small business and settle payroll taxes less than the total amount.

Conclusion

Payroll problems are a common issue for small businesses. If a company is running short on funds to meet payroll, the priority must be to secure funding from an alternate source. After all, if not carefully planned, payroll funding problems can drastically harm your business’s credibility and financial health. Small business owners should strategically manage their payroll funding by avoiding common mistakes like ill-timed hiring, poorly planned temporary projects and staff, over-staffing, delayed payment receipts, and misconstrued payroll taxes.

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.

Leadership Skills in a New Business

Entrepreneurs are considered leaders with vision and exceptional ideas that take the strengths of their company and employees together to achieve the organization’s goals. Leaders of a new business usually handle the responsibility of the success or failure of the business upon themselves, and the most prominent risk faced by the company is serious business debts.

But, numerous examples of failures of new companies in the corporate world show us that there is a difference between entrepreneurs and capable leaders. Many entrepreneurs have great ideas, but they lack the necessary leadership skills and proper bookkeeping to execute these ideas with adequate team management.

The central role of a leader in a start-up is not just generating ideas. A core leadership skill is taking the team and organizational resources currently available to execute the plans. Team building is another essential skill that leaders must possess to make their company a successful endeavor.

Decision Making Under Stress

The most significant strength of any leader of a new business or a start-up is the ability to make crucial decisions in a short and limited time. Scientific research by experts at Harvard indicates that true leadership capabilities are determined when they are under duress. For example, how well does a leader handle their serious business debts?

Procrastination in leaders is not an ideal trait for running a new business smoothly. The leader needs to be vigilant and close to employees in critical times. Keeping the employees close and explaining the principles of proper bookkeeping to them makes for excellent leadership skills. 

Managing Teams in the Initial Stages of New Business

A significant strength of a new business leader is the art of managing people in teams to help the company achieve its goals and objectives. The difference between a failed venture and a successful one is selecting the right side. When the new start-up business is going through turmoil and faces the dangers of serious business debts, sometimes the leader will be aware of how their team members regard their individual personalities. Still, in stressful situations, people’s reactions are different.

Without proper guidance from the leader, the team will collapse and eventually cause the company to fail. Instead, the main strength of the company and its leaders is to use the skills of each team member in different environments.

Irreplaceable Traits of a Leader

The leader of any new start-up must rely on their skills and tend to focus and improve their decision-making skills because these traits are unique. Another critical aspect of the company’s strength is to stick with the founding team of the company when facing severe business debts.

Managing debts and similar critical business scenarios brings about the best and the worst traits of teams and leadership. It is essential to rely on the strengths of each team member and communicate the problems wisely.

Communication Between Team Members

The communication skills of a leader in a new business are necessary because the leader must be able to communicate all of the necessary information needed for proper bookkeeping. The strength of a successful leader is to align the dominant and distinct features and abilities of their teams.

The team must feel comfortable sharing their ideas to make the new company successful. For this purpose, the roles assigned to groups must be flexible and according to their abilities. Developing a new venture in the current volatile corporate environment is necessary for the leader and the team. The focus must be on getting new clients and adding more business while focusing on minimizing serious business debts. Customer retention as a core strength of a new company depends on adequately communicating the client’s needs by business leaders to their team. Some client needs are complex and need more communication between groups and the leader.

The Bottom Line Conclusion

Effective leadership is essential for new business ventures; the undeniable fact that skilled leadership leads to better team management. Proper team management is a major strength for a new business to overcome challenges. The company’s success is just a fraction of good performance by the leader, but it is more dependent on the role of team members and their efforts. 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.

Timely Inform Employees

Most entrepreneurs who are struggling are well aware of whether they will be able to make payroll. It is due to this feeling of embarrassment, that they won’t inform their employees that they are not able to pay them. Experts recommend though that, as soon as an employer comes to know that they cannot pay their employees, inform the employees at once. Don’t handle the situation emotionally; be honest and realistic. Once you have decided to inform employees, start with upper management, working your way down to the newest employees. The top-down approach is adopted because the severity of the situation lessens when the news of no payments circulates from upper management to the lowest level.

Search Resources for Finances

An employer is liable to state and federal taxes if they are unable to pay employees. As soon as you come to know that you cannot make payroll, take decisive action. Think of all the sources from where you can get the funds. These resources may include carrying out layoffs, swift solutions of the business modification for rapid liquidity, or closing entirely. If all these plans fail, the owner is liable to penalties and fines. These fines are equal to fifty percent of the annual earnings.

Utilization of the Available Resources

Another method to pay employees without making payroll is to utilize all of the available resources. These available resources are the inventory and pending receivables your business has. These are the immediate sources of funds. Liquidate the inventory or ask vendors to pay receivables immediately at a discount. You will be able to earn capital immediately and can pay employees.

Avoid Confounding the Payroll

Some employers tend to a fraction instead of nothing at all. This method of staggering payments may not be applicable and practical in all states due to legal issues. Once you cannot pay employees, their efficiency decreases, and they are likely to flee as soon as they get new employment. 

The other method recommended is reserving some of your most trusted employees the promise that you will pay them as soon as possible. Ask them if you can hold their paychecks for a few days in order to pay other employees timely. If they agree, you will be able to make on-time payments. 

Pay for Labor Immediately

The U.S. Department of Labor states that all daily wage employees should be paid the full wage along with their overtime. Otherwise, the penalties and fines will be imposed according to the Fair Labor Standards Act.

If you are unable to make payroll, manage to pay labor, and daily waged workforce to avoid lawsuits.

Streamline Your Business

Once you are able to come out of the crisis and have paid your employees, restructure your business. Necessary modifications are needed immediately to avoid this happening again. Make changes in the business model. Decrease your overhead expenses and restructure your operations. 

Employees are the asset of your business, and you are cashing in on their hard work and honesty. Paychecks are the only source of livelihood and income for them. So, even in a time of crisis, you should be able to manage to pay off their checks so that they can survive. But, in return, they should be empathetic with you. This message should be conveyed to all of your employees.

Conclusion

Not being able to pay your employees is a dire situation for a business owner. Still, options like selling assets, borrowing money, or delaying some payments may allow you to pay them, even in the worst of situations.

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.

The Vital Role of Small Businesses in the Economy

Small businesses are the steadfast backbone of our economy, acting as a vital source of employment, innovation, and community engagement. They not only create jobs for countless individuals but also foster new ideas and products, ensuring that money remains within the local communities. The absence of small businesses would leave our economy struggling to maintain its vitality and resilience. However, many people conflate the terms “small-business owner” and “entrepreneur” despite the fact that while both run small enterprises, their leadership styles and operational philosophies are quite distinct. Entrepreneurs often embrace significantly higher risks in pursuit of groundbreaking opportunities, whereas small-business owners prioritize stability and consistent operations.

Understanding Small-Business Owners

A small-business owner is someone who takes on the responsibility of organizing various corporate processes and assumes the inherent risks that come with running a business. Their primary goal is to create a profitable enterprise, aligning with the definition set forth by the Small Business Administration (SBA). This agency is dedicated to supporting small-business owners in their pursuit of success, providing essential resources and services for those seeking financing.

While the SBA possesses a keen focus on aiding small businesses, it is essential to recognize that owners typically function as owner-operators. This means they tend to concentrate on immediate sales and operational tasks, often exercising caution when it comes to broader strategic initiatives. They are less inclined to take bold risks, favoring decisions that ensure steady, incremental growth rather than drastic shifts in direction.

The challenges faced by small businesses are starkly reflected in statistics: approximately 50% of these enterprises falter within the first four years, while a staggering 25% fail within their inaugural year. Moreover, around 76% of small business owners report encountering significant marketing hurdles as they navigate the increasingly complex landscape of online platforms available for advertising their goods and services.

Private companies continue to represent the bedrock of economic stability, providing essential services and goods. On average, businesses with fewer than 5,000 employees maintain a modest workforce of about 13 individuals. Additionally, the demographics of small-business ownership are shifting; currently, around 51% of small-business owners are over 50 years old, while only 16% are younger than 35.

For many employees, the transition to larger industries brings clear advantages. Employees at companies with over 100 employees typically earn about 31% more than their counterparts in businesses with fewer than 100 employees. The evolution of financial management has also prompted a shift in how small businesses operate—more than 50% now enlist the expertise of a Chief Financial Officer (CFO) or controller to oversee their financial accounts.

In 2014, the IRS evaluated a staggering $2.1 billion in civil penalties against individuals filing business income taxes. Out of the 1.09 million penalties issued, 47% were due to late payments, while fewer than 0.5% stemmed from inaccuracies.

Addressing the Gender Gap in Entrepreneurship

The entrepreneurial landscape reveals another pressing issue: only four out of every ten new entrepreneurs are women. This gender gap has slightly widened since the mid-1990s despite the encouraging presence of grants and programs aimed at empowering women-owned businesses.

Distinguishing Small Business Owners from Entrepreneurs

At the heart of small-business ownership lies a clear and compelling vision: addressing specific challenges faced by their communities. Small-business owners possess a profound understanding of their ventures and target markets, allowing them to cater effectively to the needs and desires of their customers.

These individuals value stability and predictability; they thrive on understanding what lies ahead and proactively preparing for it. Their decisions are calculated and methodical, often grounded in detailed financial records that guide their path forward. While the outcomes may not always be monumental, they consistently strive for progress, ensuring the resilience of their operations.

Small business owners are often preoccupied with immediate objectives. They create detailed daily and weekly to-do lists, manage their teams, build relationships with customers, and actively engage in networking to attract new clientele—all while keeping the wheels of their operations in motion.

Emotionally, small-business owners forge a deep connection with their enterprises. They are frequently hesitant to sell or transfer their businesses to anyone outside their family, as they prefer to maintain control over the daily decision-making processes and operational intricacies that define their work.

Concluding Thoughts

For those new to the business realm, the terms “entrepreneur” and “small business owner” may appear interchangeable at first glance. However, a deeper examination reveals that these roles are far from synonymous. Both groups share the common goal of self-employment and profitability, but they fulfill different functions within the broader economic landscape. Nearly every country relies on the tenacity and creativity of small-business owners to nurture a vibrant economy, while entrepreneurs push the boundaries of innovation and drive economic growth further. 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.

Employee theft of inventory and supplies and the unauthorized use of equipment, although not as recurrent as cash theft, can do major damage to small businesses. In some cases, a non-employee conspirator may be involved, including a dishonest vendor. Although cash is the ideal target for employee theft, supplies, inventory, and equipment are alluring as well. These frauds range from a box of paper clips to the unauthorized use of expensive furniture or equipment. The following are common types of employee misconduct relating to non-cash properties:

Unauthorized Use of Equipment

Employee unauthorized use of equipment can be a major loss for small businesses.

The Fraud: How about that great snowblower the company bought to clear sidewalks and the parking lot for customers? Employee Joe David decided it was better to “borrow” the company’s new tool to do his driveway than to buy or rent one of his own. While doing his driveway, his neighbors wanted to hire him to do theirs as well. Why not? Joe, the potential entrepreneur, ran the snowblower all weekend, using up all the fuel and eventually breaking the machine. There was no way the boss could clear the sidewalk and parking lot for his business Monday morning as he couldn’t get that new snowblower started.

The Flaw: Trusting employees. Leaving keys or easy access to valuable equipment. No formal policy stated or enforced.

The Fix: Set strict policies and limits for employees and enforce them. Physically secure valuable equipment. Employees may not only misuse your business equipment but may make your assets prudently “disappear.”

Inventory Shrinkage Can Be Reduced

Dealing with employee theft of inventory, supplies, and equipment can be an on-going struggle, depending on the type of workforce and turnover present in your organization.

The Fraud: Inventory can shrink due to plain old robbery, phony receiving reports, and unauthorized write-offs of old accounts receivable.

The Flaw: Depending on the industry you’re in, there is guaranteed to be some natural shrinkage in inventories over time due to minor errors of one sort or another. But large discrepancies are almost always due to fraud. Even during a physical count, a fraudster employee can use empty boxes, etc., to fool an auditor into thinking there are more units on the shelf than there are.

The Fix: As with other types of employee fraud, a formal policy of segregation of duties, strict supervision, voucher accounting, and all relevant internal controls must exist and be enforced at all times.

Physical counts should be recurrent and detailed, sometimes on a surprise basis. Nothing should be taken for granted. Reconciling bookkeeping records with sales invoices periodically is a good way to test the records. Frequent assessment of the perpetual inventory records is a must. Examination of financial statements to mine for margins, turnover rates, increases in costs of goods sold, and criminal receivables should be done monthly. Another type of employee fraud is committed to fake sales or purchases and often requires the support of an outside accomplice.

Protect Against Fake Sales and/or Purchases

Fake sales made by impostor employees may go to a phony customer or a real one who is an accomplice.

The Fraud: The property could be “sold” to a fake company with a phony purchase order and invoice and shipped right out of the warehouse to a storage facility that the fraudster employee rented to receive them. The goods can later be sold for cash, the invoice voided, and the inventory record doctored. Or, perhaps an employee is in a unique position to manipulate purchasing and receiving systems.

The Flaw: As is commonly the case when it comes to fraud, the reason these frauds happen is attributable to the lack of separation of duties, lack of supervision, and lack of overall internal controls.

The Fix: It bears reiterating that a formal policy of separation of duties, strict supervision, voucher accounting, and all relevant internal controls must exist and be enforced at all times.

Conclusion

Unfortunately, fraud is inevitable in many organizations. Regardless of the size of the fraud allegation or the individual involved, the organization should consider having a documented policy of how fraud allegations will be investigated and resolved. 

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.

Debt is the amount of money received from a lender to invest in a business to finance its operations. If paying the debt back is not prioritized in small businesses, it will keep on piling up and become a serious threat to your company. The debt will become unmanageable and can result in the bankruptcy of your small business. Here are six amazing tips for digging your small business out of serious debt.

1. Cut unnecessary costs and free up cash

Keep a strict check and balance on the expenses going on in your business. Do not sign any repayment application before double-checking the purpose, date, and invoice number.

Eliminate unnecessary expenses in your business. For example, if your advertising is costing you too much, then consider using social media and directly interacting with your potential customers as a way to lessen the cost.

2. Consolidate your loans

Serious debts in small businesses often result in cash flow problems, which will create more debts. Small business owners often take more debt on interest to pay back their previous debt. These owners can refinance their business by consolidating the debt they have taken. They will have to pay back the debt monthly in small, manageable payments.  Making these payments means you will have to reserve a smaller amount of cash for debt payback every month. This will not generate a cash flow problem in your company, and this can allow you to take more loans for debt payments and other business operations.

3. Think productively about increasing income

Debt counselors often suggest finding a means to bring in more money in your business to eradicate the debt-payment liabilities from your business forever. Find ways to increase income. You can seek out options to work overtime for the time being while the company is in debt. 

Liquidating high-value assets can be done as a last resort, but it still provides an option for paying the debt in time. You can sell a valuable asset of your business that is not in use or is not a part of the capital investment.

You can ask investors to bring in more money to grow your business and pay back the loan faster for digging your company out of serious debt.

4. Prioritize debt payments

Paying the debt must be your priority. You can hold onto certain expenses. You can hold some personal facilities for you in your business. Inventory should be managed. You can delay payments of your purchases until the date it is due as long as you pay in time. All of this has to be done in the process of digging your company out of serious debt with those high interest rates that can kill any company.

5. Revisit the budget

If the debt continues to build, then it possibly means that the company’s existing budget is not working out. Cut down on the expenses that are not vital in your company. Always keep the money for your monthly payment of the debt. Do not use this money for any other purchase. Otherwise, the debt with interest will keep piling up. Manage your inventory. Do not purchase extra stock.

6. Drop credit cards

Credit card use in your company also means that your business is delaying payments of the expenses. Try using cash when available.  And, if the money is not available, avoid overspending. Do not use credit cards while you are in the process of digging your company out of serious debt. Credit cards are also a means of unnecessary purchases at certain times.

Conclusion

Serious debt on your small business is the debt you had taken earlier in the company’s history that continues to pile up. The reasons can be that your company’s debt produced cash flow problems, and you had to take more debt. The interest on debt kept increasing along with the loans taken. This piling up of serious debt can result in the insolvency of your small business. Use the above tips for digging your company out of serious debt. 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.

An entrepreneur often creates debt when funding large purchases that could not be afforded under normal conditions. A debt arrangement means that the borrower loaned money to return the money through interest payments.

Equity is the worth of an asset minus the total of all liabilities on that asset. Equity financing is the course of increasing capital by the sale of shares in a business. The sale of ownership parts to improve the finances of a business is equity financing.

Equity financing has a broad spectrum to increase ownership shares. Friends and family members can be asked to invest funds and gain ownership shares accordingly. Financing from other private companies can also be considered in equity financing. 

While this information may indicate that it makes the most sense to use equity financing instead of debt-inducing loans to finance aspects of your business, there are some advantages and disadvantages to both options. A comparison should be made between debt loans and equity financing to help you decide how to finance the needs of your business.

Debt vs. Equity Financing

Debt vs. Equity Financing is a strategic decision made by small and medium-sized business owners or financial officers. One should consider the pros and cons of increasing business capital through debt financing or equity financing. Here are the advantages and disadvantages of debt vs. equity financing.

Advantages of debt financing through equity financing

• When taking debt, the lender has no claim to equity in the business. Ownership remains the same. Business operation and bookkeeping decisions remain with the owners/entrepreneurs/executive management.
• When net profit is increased, the lender will only be given the debt money and interest. If business progress and rewards are more significant, the entrepreneurs will reap the rewards. The lender will have no claim or share in the business rewards/profits.
• Interests on debt can be subtracted from the business’s tax returns.
• There will be no need to seek the vote of shareholders in the business to make certain decisions.

Disadvantages of debt financing over equity financing

• Debt has to be paid back with interest, regardless of whether the business is running successfully or not.
• High interest on debt during the recession of business can dissolve the business.
• The bigger the debt-to-equity ratio in a business, the riskier business is considered by the investors.
• The company is usually required to place the company’s assets as a security/warranty to the lender.

Debt vs. Equity Financing: Which Way Should Your Business Go?

1. How early are the finances needed? If there is no time to wait, then debt financing is left to invest in the business.
2. How much finance is needed? If there is a small amount to be invested, then debt can be taken.
3. If a company is running successfully and financing is required urgently, debt can be taken.
4. If the business is growing and thriving, equity will provide a chance to attract investors with experience and knowledge. A good business relationship is established among the entrepreneurs/investors. It can have a remarkable positive impact on business in the long run.
5. Debt is good only if you want to keep the business local and keep the whole ownership with you. But, if the company is progressive, reaching other markets other than your local community, you might need to go for equity financing.
   
   

Conclusion

Debt and Equity Financing are the two options available for small to medium-sized business owners when they need to invest more money but they lack the amount at the time of financing. Entrepreneurs must consider all options for choosing debt or equity financing. If the company faces a period of decline or recession, then the debt may not be a good choice.

Making financial decisions for your business can be a challenge. However, if you carefully weigh the advantages and disadvantages of debt vs. equity financing, you can do what is best for your company financially.

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.

Internal fraud can happen to anyone; no business is immune to it. Companies in the US lose over $500 million annually due to internal fraud. Here are some signs of internal fraud and responses.

Unjustified Transactions

Any unexplained and unjustified changes in bookkeeping records are a definite warning sign of internal fraud. If there is a decrease in revenue despite continuous payments from the business bank account or if there are various pending payments for long periods without any justified reason, then there is most likely something suspicious happening. Also, if there is an unexplained increase in expenses and a sudden decrease in profits, it means that money is draining out of the company to a place where it is not supposed to go.

The Over-Efficient Workaholics

An accountant who is a fraudster will go to any extent to hide his or her crime. They often want to work off-hours when everyone has gone home. Another sign is that they refuse to go on leave or use any vacation time. They often try to take work home. All of these activities are red flags and need to be addressed. Keep an eye on such workaholics. Unfortunately, there may be an underlying reason for working such odd and extreme hours.

Unexplained Satisfaction

Fraudsters try to hide their working documents and processes from managers and others. If any manager or other employee tries to get involved in their work, they become offended. They give unsatisfactory explanations and answers on any fault.

They are overprotective. They work alone and don’t like any involvement or interference. Records maintained by them become inaccessible and untouchable to others. When asked questions, they become strangely defensive. They know that the records will expose their crime, and their answers will be suspicious and unrealistic.

Financial Stress

If an accountant is facing any financial stress in their life, there have been cases when they plan internal fraud to fulfill their needs. Any unexpected financial loss such as divorce, mortgage, or debt acts as the trigger for internal fraud. Know your employee by taking time for small discussions with them about their current situation. By doing this, you can detect any sudden change in their behavior and activities.

How to Respond to Internal Fraud?

A business owner should know how to respond to internal fraud. Whether the one committing the fraud should go through an internal investigation or be handed over to law enforcement should be a decision that you are prepared to make.

A forensic accountant should be consulted for an expert opinion.  They will investigate and interpret your financial information. They will analyze the amount of loss due to fraud, collect all shreds of evidence, preserve them, and prepare a summary of the lawsuit. They will suggest a policy to prevent fraud in the future.

Termination is the minimum consequence of internal fraud cases. Along with termination, other penalties enforced by a lawsuit are necessary to make it an example that fraud will not be tolerated in your company.

How to Investigate

An internal investigation should be exhibited in such a way that your employees, partners, public, and donors trust you and your investigation. No question on the credibility of your investigation should be raised. Hire experienced fraud investigators to ensure that your investigations are handled according to law and be sure that there is no violation of legalities.

A prompt decision needs to be made by the business owner, internal audit, board of directors, and forensic accountant alone or in combination. The decision-making authorities should address the size of the fraud, the target of the investigation, how to recover the loss, and other risk factors.

Interview all of the parties, i.e., vendors, customers, and employees. Review all relevant records. Preserve the evidence as early as possible because documentary evidence is key for investigations. Forensic accountants and IT personnel should be hired to do investigations in the best way to ensure that you handle them thoroughly.

Conclusion

Internal fraud should be investigated in detail to produce evidence for legal prosecution.

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.

A business credit score reflects the ability of a business to pay back a loan. It is rated on a 0 to 100 scale. 

Calculating Your Business Credit Score

Your business credit score is calculated by using the statistical algorithm, designed to measure several traits of your company and financial history.

Among these factors are:

• Credit use ratio
• Payment history
• Length of credit history
• Unpaid debts
• Public records, such as bankruptcies, liens, and judgments
• Business size
• Business risk

Some of the factors are similar to calculating a personal credit score. However, many factors are different in building business credit scores.

How to Build and Improve Business Credit Scores 

1. Get a business credit card or line of credit

Of course, the first step in building a business credit score is to get a business credit card. You can also get a line of credit for your business. Be sure that you are getting a business credit card for your business financing, not a personal credit card for your individual finances.

2. Separate your business and personal expenses

This is not only important for avoiding accounting mistakes. This is also essential in building credit scores for your business.

3. Select your supplier and lenders with an eye on your business credit

Many small businesses have incomplete business credit accounts because their dealers and money lenders don’t report costs to the business credit unions.

4. Pay your bills on time or, better yet, in advance

If you want to make sure that your business credit score is high, then you must pay on time. A delay in payments ruins your business credit, and a delay in payments from your company affects the cash flow of other businesses. This is the same as when your clients do not pay you on time, and it affects the cash flow process of your small business.

Much of your business rating depends on how you pay your suppliers and other contractors within an approved time frame. If you pay in advance or on the spot, this practice will make your business credit even better. Your suppliers and contractors will further put remarks like “prompt,” “pays early,” etc. 

The reason for such nice additional remarks is that every business needs a prompt cash flow for its running. Other companies might also be going through cash flow problems. Early payments or payments done on time significantly reduce cash flow problems.

Your business credit score is used to measure the lending and credit risk linked to your company. A good business credit score shows that your company can manage debts and finances efficiently.

5. Utilize credit, but not too much

Your business should utilize the credit score it has, but make sure not to overuse it. If you continue utilizing your business credit score for your business operations, it will be beneficial. You will keep building and utilizing some of your credit scores. It is just like taking a loan and paying it back promptly. It builds trust in your business’s ability and financial stability. But, consuming all of the credit score or too much of the score means your company is not financially stable and is relying on the credit score it builds over time.

6. Fix errors on your business credit score report

If there are errors in your consumer credit report, there is a fixed process for disputing them. However, for business credit report errors, there is a different process everywhere. Every bureau has its procedure for disputing business credit errors. You can submit disputes electronically.

Conclusion

Using a business credit card or line of credit helps to build your business credit score. You have to build and keep improving your business credit score by making on-time payments, using the business credit card, and continue utilizing some of its scores to your benefit. All of these steps build a better and more trusted image of your business.

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.

Business owners frequently grapple with the unsettling reality of fraud and theft, predominantly instigated by their employees. This risk has significantly escalated with the rapid advancement of technology and the dynamic nature of the global marketplace. According to extensive research, organizations typically incur an alarming average loss of 5% due to fraud each year, with internal employees accounting for a staggering 85% of serious fraud cases. Given these troubling statistics, it becomes imperative for organizations to devise and implement comprehensive, multi-layered fraud prevention strategies. Below, we outline effective plans and policies designed to combat fraud and employee theft within your business.

Cultivating a Strong Corporate Culture

A well-defined corporate culture serves as the backbone of an organization, outlining the procedures and policies that dictate employee conduct. Establishing a transparent organizational structure that specifies reporting systems, clarifies the roles of accountable individuals, delineates the segregation of duties, and defines job responsibilities and regulations is essential. Additionally, employing the right individuals is crucial; thorough background checks on applicants’ past employment and educational history can help ensure that trustworthy candidates are onboarded.

Creating an Anti-Fraud Policy

An effective anti-fraud policy is not just a document but a foundational element that articulates the definitions of fraud and outlines its prevention and detection procedures. This policy should be clearly communicated to all employees, emphasizing a zero-tolerance approach towards any form of deceit. Employees must also understand the steps they should take if they suspect fraudulent activities within the organization.

Safeguarding Physical Assets from Theft

Implementing random and surprise audits

Alongside scheduled annual and quarterly audits, introducing unannounced audits can significantly reduce the likelihood of employee theft and fraud. The unpredictability of these audits serves as a powerful deterrent, encouraging employees to adhere to ethical conduct.

Segregating duties for inventory management

Segregating the responsibilities of inventory management staff is vital to fortifying against potential fraud. By ensuring that one individual issues purchase orders while a different person receives the stock, you create a system of checks and balances that minimizes opportunities for deceit.

Installing security cameras

The strategic placement of CCTV cameras in inventory storage areas can play a critical role in monitoring employee behavior and deterring theft. The mere presence of surveillance can discourage wrongdoing.

Restricting access to inventory areas

Limiting access to inventory storage areas to authorized personnel secures valuable assets and promotes accountability. These areas should be securely locked after hours, with keys distributed solely to designated individuals.

Combating Check Tampering

Securing blank checks

Blank checks should always be secured and locked away until they are needed for bookkeeping purposes. This precaution helps prevent unauthorized use.

Regularly reviewing bank statements

Monthly reviews of bank statements represent a proactive strategy to identify potential fraud, especially concerning tampered checks. Anomalies in transaction records can often reveal foul play.

Preventing Expense Reimbursement Schemes

Mandating receipts for expense claims

Employees should be required to submit legitimate receipts for any expenses they wish to claim for reimbursement. This practice ensures accountability and traceability.

Establishing a clear expense reimbursement policy

A documented policy detailing reimbursable expenses is essential. This policy should clearly outline covered expenses, and each employee must receive a copy to ensure understanding.

Conducting comparisons of expense reports

To enhance oversight, designate different employees to review and compare expense reports submitted by their peers. This collaborative approach helps confirm the legitimacy of claimed expenses.

Preventing Billing Schemes

Maintaining an approved vendor list

Developing a list of approved vendors is critical in shielding the organization from fraudulent billing. Conduct thorough research to verify the legitimacy of each vendor to avoid inadvertently engaging with fraudulent companies.

Establishing a price list for vendors

Vendors should provide a list of approved prices for their goods or services. This measure helps protect the organization from overpayment and ensures fair pricing.

Requiring signed receipts for transactions

To facilitate transparency, checks should only be signed when accompanied by a signed receipt for the corresponding product. This practice encourages accountability and thorough record-keeping.

Protecting Cash from Theft

Requiring management approval for sensitive transactions

All sensitive financial transactions should be conducted only with explicit approval from a manager. This oversight helps safeguard against unauthorized access to funds.

Receiving monthly account statements

Frequent updates and reviews of customer accounts allow for the timely detection of discrepancies or fraudulent activities within the cash flow.

Implementing duty rotation practices

Regularly rotating employee duties and encouraging annual leave can deter theft. These actions create an environment where employees are less likely to engage in dishonest behavior due to the increased risk of detection.

Utilizing bank lockers for cash management

Reduce employee access to cash handling to further mitigate the risk of cash theft. Payments should be directed into the company’s bank account, minimizing employees’ physical handling of cash.

Conducting surprise cash audits

Regular, unannounced counts of cash against receipts can quickly uncover discrepancies and illuminate any potential theft.

Installing video surveillance in cash areas

Video cameras located in sensitive cash handling areas can serve as both a deterrent and a monitoring tool, helping to prevent theft.

Conclusion

Establishing robust fraud prevention measures is vital for your business’s security and integrity. By implementing and adhering to the plans and policies outlined above, you can create a vigilant environment that significantly reduces the risk of employee theft and fosters a culture of honesty and accountability. 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.