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 a business’s scale or magnitude, funds embezzlement exists in almost every organization. Therefore, you must develop a prevention plan before embezzlement drains your small business.
Preventing Employee Embezzlement
Employee fraud and embezzlement can occur in any organization. Small businesses often lack experience and knowledge, preventing them from having the proper checks and balances. According to studies, businesses lose approximately 8% of their annual revenues from theft and embezzlement, making it the most significant reason most start-ups fail to create an impact and generate revenue. Employees can make or break a business; they have the potential to take a business to the top or break it apart into pieces. Employees can determine the fate of a company and its long-term survival.
Employee embezzlement can drain your small business of finances and resources, perhaps costing you everything within a short amount of time. The portion of assets an employee steals each month will eventually accumulate to a considerable amount, leading a business towards its gradual demise. Stealing from an employer raises severe moral and ethical concerns; it is not a legal activity under any circumstance. Moreover, it may lead one to face severe repercussions, including lawsuits and jail time.
Embezzlers can often get away with their actions because they steal at a suitable time. They know their organization’s processes and have a clear understanding of how to steal without getting caught. However, with increased technology and advanced accounting software, you now have options to prevent maximum theft in your company. Below are 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 implementing and maintaining an advanced system, you can prevent embezzlement or data breaches. 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 financial records to obtain a clear picture of your company’s financial health. Any discrepancies found in the records should be addressed wisely. Financial records and bookkeeping reveal a company’s true financial status.
Respond to Client Complaints
Responding to client complaints is one of the simplest ways to determine if embezzlement is occurring in your organization. Clients often complain when their order is not dispatched properly or does not meet their expectations. Therefore, if you start receiving many complaints, it is wise to investigate the matter. Deeper research and consideration may reveal if something suspicious is happening within the organization.
Notice Employee Habits and Behavior
Pay attention to any significant changes in your employees’ habits and behaviors. To stop embezzlement before it drains your business, you must develop a mechanism that may discourage employees from participating in malicious and unethical deeds.
Leverage Control over Financial Decisions
At the core of every successful business lies well-established and ethical teamwork. You cannot expect to succeed alone. You need to empower your team to help prevent fraudulent activities. Although most organizations are affected by this disease, you must 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 those related to financial decision-making. Preventing and stopping embezzlement in its tracks is extremely important to winning the competitive business race.
Conclusion
In conclusion, embezzlement poses a significant threat to businesses of all sizes. Implementing preventive measures is crucial to safeguarding your small business from financial losses and reputational damage. By staying vigilant, regularly monitoring financial records, and fostering a culture of transparency and accountability, you can effectively deter and detect embezzlement before it wreaks havoc on your organization. Remember, proactive measures are key to preserving your business’s integrity and longevity in the face of potential threats.
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