7 steps to avoid asset misappropriation in small business

Having your own successful business takes a lot of hard work and sacrifice. It’s a momentous achievement when your business starts making money and the quality of your life improves as a result. Unfortunately, there are many challenges to face when you’re running a business. Some of them, like asset misappropriation, can have damaging effects on the company’s bottom line.

Fortunately, when you suspect that your company has an asset misappropriation problem, there are companies like the Knowles Group who can assist. Specialists in forensic economics will use forensic audit methods to assess economic damage to your company.

Here are some steps that you can put in place to avoid this financial loss in the first place:

What is asset misappropriation?

Asset misappropriation sounds like a complex phrase, but it’s actually just the legal term for words like embezzlement, fraud, and theft. Misappropriation refers to the act of “stealing” something, usually money or inventory, which was entrusted to a person, for their own purposes.

Misappropriation usually includes the following:

• Inventory theft: Employee takes stock illegally or facilitates the theft.
• Cash theft: Stealing cash within a retail environment.
• Skimming cash: Employee doesn’t register the sale and pockets the money.
• Check tampering: Employees alter any information on the check to benefit themselves.
• Check forgery: Employee forges a signature on a check to gain access to cash

Tips to avoid asset misappropriation

You have no doubt seen large corporate companies suffer devastating losses caused by misappropriation. Imagine the effects on a small business. One employee misappropriating funds from a small business can most certainly wipe that company out if not detected soon enough. So, what can you do to prevent any form of misappropriation? Here are a few tips to consider:

• Employee checks: Conduct extensive and thorough background checks on newly appointed staff.
• Random audits: Conduct random and undisclosed audits on all company accounts.
• Random inventory checks: Conduct inventory checks to determine if stock levels balance. Don’t inform staff of date and time, thereby eliminating opportunities to cover stock theft.
• Duty rotation: Rotate duties of employees in accounts, especially those who have access to money, checks, EFT facilities, or company banking procedures.
• Limit access: Don’t give one employee access to various systems. For instance, the employee who receives stock from a vendor shouldn’t also have ordering access. This will eliminate stock, or even equipment like digital screen displays, being ordered and never making it to your showroom floor.
• Company bank accounts: Scrutinize your business bank accounts regularly. Check for discrepancies and any transactions that don’t balance with your financial records.
• Expert help: Spend the money to have Certified Fraud Examiners and external auditors to assist with audits and services to eliminate fraud. It’s more of an investment than an expense.

Endnote

It’s crucially important to protect your company assets. This includes your inventory and your cash. Don’t let your good nature trust employees who might have misplaced loyalty. With our seven tips and some additional vigilance on your part, you’ll be able to ensure the security of your business.

 

12/07/2022