Small businesses are vulnerable to a great many things because of their lack of financial power and their position in the market. A changing customer trend, a new market player or a big company coming after your clients are things to be worried about as you try to make you way through the business world.
Another area of worry which has the power to completely break your small business is that of embezzlement, the theft or misappropriation of funds by one of your employees. We spoke to Steve Sorensen embezzlement avoidance expert on how your small business can take steps so that you can greatly reduce the risk of anyone stealing from your company.
Regular 6 monthly or annual audits are a fantastic way of helping to avoid embezzlement being an issue at your small business. You should carry out a self-audit every two months and then invite an outside firm to come in and audit your books at least once per year, if not with more regularity. Make sure that an audit is always a surprise and that you staff know that this could be due at any given time. This should create an environment in the business where people know that they must do things in the right way.
If you make sure that al of the money that comes into your business goes through a checking account then you will also be making sure that each cent is accounted and receipted for. This means that should there be someone in-house who is doing things that they should not, they can alter the books in your business to hide it but they can not alter bank records. This means that when an auditor comes in, they can immediately highlight problems and potential theft.
Don’t be blind to the fact that embezzlement could happen to you at any time and by any person, the large majority of cases such as this are perpetrated by close friends of the owner of a business and long time and respected staff members. This is not to say that you should hold everyone under suspicion on the contrary but you should definitely be aware of the possibility of it taking place so that you can take steps to avoid it happening or at least see it happening before it is too late.
You should never have the same member of staff who works as the vendor, the approver of fund and the check writer and you should endeavor to split these tasks across at least 2 different people. Not only does this make it much easier to steal funds with one lone member of staff completing all three tasks but it also provides temptation for these staff to commit crime, you may think that someone isn’t capable of doing such a thing but if they are having financial difficulties, they may start to take you up on that temptation.