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. Moreover, it has been around since the beginning of time. However, no one can deny that businesses are vulnerable to fraud, primarily SME entities that suffer excessively huge fraud losses. SMEs must ensure adequate internal controls to create a favorable profit-producing environment. Furthermore, you may believe that fraud cases are found in large-scale companies with thousands of employees in multiple locations.
SMEs are Vulnerable to Employee Fraud
Today, organizations have mixed opinions on dealing with fraud cases. 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.
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 comprehensively analyzing 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.
Moreover, in organizational setups, SMEs have scarce resources that they need to ensure that everything is under control. Furthermore, business owners must 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. Additionally, organizations can catch up with their fading fate by creating, implementing, and practicing the proper internal controls.
Corruption Ruins the Business
Moral and financial corruption eats up an entire organization, slowly and gradually. Diminishing profit margins and draining profitability lead a business toward a complete disaster. Early on, owners 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 passed achieve extraordinarily little or no success. Some organizations hire professional managers who can turn things around on their organization’s behalf. However, turnover seems wise, especially for those good at yielding sales and profits but lacking the 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. Companies can often overcome business challenges effectively by slightly modifying the existing organizational processes. 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. However, this way, you get to know whether your employees are stealing from you, and if they are, you will know who is stealing!
Additionally, it would be best to ensure your employees abide by the policies and procedures. Encourage your employees to document everything to determine what is lacking or where the problem is. These are some of the ways you can maintain proper internal control in your organization.
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