Employee fraud and theft are certainly a big concern for small businesses. Most owners don’t realize the impact a fraud could bring to their business and don’t believe it until they face the curse themselves. Small businesses have every reason to worry about fraudulent activities in their company. It can hamper and disrupt their working capital and, most importantly, their cash flow.
Undoubtedly, small businesses are more vulnerable to employee fraud, theft, stealing, larceny, robbery, and embezzlement – whatever you name it – because of ill-defined practices and processes and lack of business control. This indicates that a lack of accounting knowledge, wisdom, and business management skills may land you in real trouble.
Employee Theft and Fraud Can Lead to Lethal Repercussions—Are You Protected?
There is certainly no denying the fact that employee fraud can devastate your business. No matter how successful your entrepreneurial venture may be, a slight miscalculation in finances or wrongful business projections can devastatingly hurt your business. According to studies, US-based companies suffer a staggering $150 billion loss in fraudulent employee activities every year, of which 83% of theft happens in small businesses.
Another trend identified by the ACFE (Association of Certified Fraud Examiners) is that small businesses with fewer than 100 employees are more vulnerable to employee fraud, which can even kick the company out of the competitive race. Two core reasons are a greater degree of misplaced trust and a lack of basic accounting controls.
If small business owners expect to stay competitive, they must develop practical and implementable loss prevention strategies to get their business in full swing. Those who steal from you are typically the least suspected in the company because of their well-established trust and faith.
What Should You Watch For?
In today’s era, catching culprits does not have to be that hard. We have superior technology and practices that can help us prevent organizational losses and discourage fraudulent activities such as employee fraud. Blind trust can lead you to a complete failure or utter disaster. You need to track and monitor daily business operations and activities, especially the influx or outflow of cash yourself, to keep things going in the right direction. The fear of losing money and assets can cause anxiety and mental stress, which can be troubling for your health and business.
Any significant behavioral changes in employee attitude, working abilities, or spending habits can be warning signs of the possibility of employee fraud. Sometimes, financial stress and pressure at home can also lead an employee to commit theft or fraud. Moreover, your employees living beyond their financial means can also raise suspicion, which needs to be investigated. Pure blind trust is a story of the past. No matter your trust in your employees, you must ensure they are not stealing from you or committing fraud.
Ways to Protect Your Organization From Employee Fraud
Creating a written fraud or theft policy can help prevent employee fraud. This way, employees will know what fraud means to the company and the repercussions if someone from the company is involved in fraudulent behavior or activity. To set a precedent, you must establish a code of conduct with a zero-tolerance policy to discourage such illegal activities.
It would be best to have bookkeeping and accounting control to make better business assumptions and decisions. If you have hired internal and external tasks of the business, you need to conduct an audit regularly to know your business’s actual financial conditions.
Conclusion
In conclusion, employee fraud poses a significant threat to small businesses, impacting working capital and cash flow. The vulnerability arises from ill-defined practices and a lack of business control. The financial toll is substantial, with US companies facing a $150 billion annual loss, with 83% occurring in small businesses. The ACFE highlights the heightened risk for companies with fewer than 100 employees due to misplaced trust and inadequate accounting controls.
To stay competitive, small business owners must implement practical loss prevention strategies, including establishing written fraud policies and a code of conduct and maintaining effective bookkeeping and accounting controls. Vigilance and regular audits are essential in safeguarding against employee fraud and preserving the health and success of the business.
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