Financial planning and stability are of utmost importance for businesses, whether it is a startup or established ones. As per Failory, 20% of businesses fail in their first year. When it comes to reasons for failure, 16% of businesses fail due to financial problems.
This number may seem a bit small but portrays a clear picture that financial planning is necessary. The reasons behind financial issues and low revenue can be many, one of which is employee fraud.
The key component that can ensure transparency in the finances of your company is monitoring. Hence, it is imperative to develop and implement clear checks and balances system to reduce the possibility of loss to the business.
Scenarios where a robust check and balances system will be helpful!
The one rule to prevent any type of fraud in your business is to segregate the power. The power to manage anything should not be solely in the hands of one person.
Cash and Check Monitoring
The key element is where things can go wrong, and you may not even know it. Check fraud is a prime example of this. Statistics suggest that around 53.6 million British pounds were lost in check frauds in the UK in 2019. Though this value declined by a significant amount in 2020, it was still there.
Hence, it becomes necessary for you to have different staff members for check writing and signing. Moreover, you also need to check logs and conduct occasional or surprise cash drawer audits. These will help you deter theft.
To make the check printing and monitoring process more secure, it is best to go for online check printing. It is not only a secure method, but it also eliminates the hassle of stacking pre-printed checks. You should know more about how to use print and mail API for your business.
Again, if one person is given the power to control and manage all the company’s financial expenses, there is a high chance of fraud. Bookkeepers who are responsible for preparing bank deposits, handling payrolls, making purchases, and preparing invoices can harm your company significantly if not taken care of. That’s why it’s also recommended to keep everything on a collaborative platform (with templates for creating invoices) so management can keep tabs on eveything financial.
To make sure that every earned or spent penny goes into the needs of the company, you need to:
- Apply the rule of power segregation.
- Compare the bookkeeping records to your bank accounts for reconciliation on a periodic basis.
- Monitor the signs of the concerned person (behavioral changes, spending, etc.)
- Limit access to a certain level (introduce the concept of a counter signature on checks and allow them to access only certain records of the firm).
Keep a check on the Inventory
The eCommerce market is on the rise at the moment. So, if you have got a successful eCommerce business these days, then you are blessed. However, it can be a bit tricky to keep up with the cut-throat competition. Moreover, it can become tougher if you become a victim of inventory fraud.
There may be a mole in your staff that could be playing smart with your inventory tracking. He or she could either be stealing a bottle of wine from your production line or maybe selling your raw material inventory to a 3rd party.
Now, one bottle of wine may seem like a small thing, but what if this becomes a habit of more employees? You may go from making carats to peanuts in no time. So here are some ways to eradicate inventory fraud:
- Automation of the production and packaging process (less human intervention, less fraud).
- Integrate a formal management reporting system.
- The element of surprise (conducting stock counts and shipping audits unannounced can help you find the culprit easily and quickly)
- Yield analysis (use data analytics tools to contrast actual production output with the projected output based on the input material and labor.)
Analyze business growth
It is not a compulsion that if there is a decline in inventory, it will be due to theft. However, there can be cases where the demand for your product has surged in the market. In such a case, you need to perform a complete analysis of the used inventory and workforce.
If your business is flourishing, you need to keep it that way, right! So, for that, you have to increase your workforce and inventory. But, one can make an informed decision about the same if they have a robust checks and balances system.
With this, you can reduce missed opportunities and enhance your business growth.
It is not that easy to run a business, especially when it is new. In the initial stages, you cannot trust anyone, but you have to as you need them. However, to make sure that your confidence in them leads to better results, you need to build a reliable checks and balances system within your firm. This will not only help your business but will also keep your workforce disciplined.