Close to half or 47% of businesses are impacted by financial crimes, resulting in $1.45 trillion in total losses globally. And these activities are responsible for affecting or damaging the economic activity and reputation of companies and brands. This is according to a report from ReputationUP Coach.
Financial Crimes at Businesses
While businesses will make a more concerted effort to protect outside threats, they don’t put the same effort when it comes to threats from within the company. And this greatly benefits employees, vendors, or partners who are looking to commit financial crimes.
According to the ReputationUP Coach report, money laundering damages between 2% and 5% of global GDP. The United Nations claims this comes out to $800 billion to $2 trillion in one year. And the impact of a financial crime on a business can be devastating.
The biggest consequence is of course shutting down the business. However, if the company continues to operate, it can experience lower income; loss of trust by employees, partners, and clients; damage to its reputation; losing future hires, and more. And the impact doesn’t only apply to large companies. Small businesses can also suffer greatly because of financial crime within the company.
Financial Crimes Within Small Businesses
Although it may seem difficult to embezzle or defraud a small business within the company, it is very common. And with the advent of digital technology, it has become much easier for insiders to commit these crimes.
Acts such as forging checks, cashing customer checks, faking vendor payments, overbilling customers, and stealing customer financial data are far too common. But it doesn’t stop there. Employees also steal the business identity of the company and start a business using the resources of the company they work for. These are but a few of the embezzlement examples people have used to commit crimes while working at a business. The key to mitigating or minimizing the impact of these crimes by implementing a solid financial policy with unwavering governance.
Having a solid financial policy in place is especially important for a small business because the impact can shut down the company.
When it comes to making payments or giving access to your employees have a financial policy for approving bills, authorizing payments, scheduling payments, and managing user access. Furthermore, establish an audit trail you check with very little time lapses. The longer you wait between each audit, the higher the chance the person can get away with more money. Even though you might not be able to stop the crime from taking place, a timely audit will save you a lot of money.
Some of the other steps you can take are going paperless, enforcing payment controls, automating work processes, and eliminating checks.
It is worth mentioning again how important it is to increase internal audits. If you have a strong checks and balances system in place with an automated process, you can make regular checks without much effort.