For every dollar of sales, 10 cents goes to theft. That’s according to a study by the Colorado Springs Business Journal. The US SBA states that 2/3s of all of those thefts come from employees. Now, let’s make it even worse. The average small business embezzlement is somewhere between $150,000 – $190,000, depending on which study you read. Big businesses lose a lot less than that.
There are a couple of reasons why small businesses are more likely to have embezzlement issues.
- Smaller businesses centralize business functions. Often one person has control of too many individual tasks of bookkeeping such as check writing and reconciliation.
Solution: Outsource some aspect of your accounting. You may want to have a virtual bookkeeper do bank, payroll and credit card reconciliations and review A/P and A/R journals. You may additionally want a virtual CFO to analyze and look for new opportunities. This is also a great way to pinpoint potential areas that appear out of whack. (And thus, more likely to be subject to some fraud.)
- Small business owners tend to hang on to too many tasks themselves. Because they aren’t trained bookkeepers, the bookkeeping isn’t done in a timely fashion. In fact, the only time financials might be done is when it’s tax time and by then, it’s often too late to catch a problem. Even if the financial reports are properly prepared on a monthly basis, it’s doubtful that the small business owner has the expertise and time to accurately review the financials to spot problems.
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