Small businesses are vulnerable to internal fraud or theft. The human tendency is to fall prey to our desires that perhaps encourage most of us to indulge in fraudulent activities in an organizational setup. Hiring top-quality and honest employees have become the need for businesses. Small business setups have less control over core business operations and finances.
How Is Big Of A Problem Internal Fraud?
Regardless of the size and scale of a business, fraud is, by far, the most common problem for businesses as they become increasingly digitalized. Employee theft or fraud has long existed in one form or another, which makes it clear that it is not a thing of today. However, the problem is getting worse day by day, since employees have become more clever than ever as they use sneaky ways to steal from their employers. There is no denying the fact that internal fraud can lead to a negative impact on the name and reputation of the brand, which means it can tarnish the brand value of the company and can also have serious financial implications. So, protecting your business from internal fraud has become the need of the hour and absolutely necessary for maximizing revenues and profits for the company.
Types of Fraud
Looking at the bigger picture, there are two types of fraud; internal and external, but internal fraud is much more damaging than external. Why? Because if employees within the organization are against the company’s growth, expansion, and hence success, then what else you can expect from external parties or someone outside of the organization.
What is Included in an Internal Fraud
From the misuse of credit cards to the theft of financial data to wrongful claims of expenses, staff use sneaky ways to steal from the company. The thing is that employees are not that loyal to the company as they used to be. It has become more of a money-oriented society rather than showing loyalty towards a company, which encourages employees holding key positions such as accounting or business manager to steal from the company.
What Are The Warning Signs Of Internal Fraud?
Internal fraud can be controlled with regular reference checks and establish more control over bookkeeping and accounting activities. According to a study, employees start to steal from the company when they are not acknowledged and recognized according to what they deserve. So, the chances of internal fraud increases when you underestimate or undervalue your employees, especially those who have to manage your accounts and finances. Other reasons include debt or greed, financial pressure, and emergencies, boredom, or simply availing the opportunity at hand to steal from the company.
How to prevent internal fraud?
Know Your Employees
It is important to have a staff that you can trust with sensitive information about the business. Before hiring employees, make sure to verify their personal information and track record from the previous organization they might be working for. So, hire only those employees who have the potential to be an excellent resource for your company.
Know Your Assets
An employer must monitor and keep track of the firm’s assets or possessions for preventing internal fraud. Employees who usually intend to steal from you know about what you care about and what you typically monitor. So, the things that are kept away from your eyes usually get stolen with a well-laid strategy and thought. So, you must know exactly about your tangible assets as well as sensitive data (financial records, accounts, and bank statements) or intellectual property.
Introduce a Reliable Accounting System
By keeping an advanced accounting system in place, you can expect to decrease potential threats and dangers associated with accounting and finances. It is ideal to get a custom accounting system tailored to your business needs and specifications for accurate maintenance of cash flow. This way, you can prevent internal fraud posing a threat to your business.
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