As a business owner, staying on top of your finances can be challenging at the best of times. With so many different elements to take into consideration, such as payroll, your day-to-day expenses, purchasing and so much more, many business owners get overwhelmed just trying to keep on top of their accounts. And, when you do finally get a handle on your business finances, you need to also consider what happens when things don’t quite go according to plan.
Many SMEs don’t give enough consideration to accounting errors and avoiding fraud until it’s too late. The fact is, that for a multitude of reasons, small to medium-sized enterprises are often more susceptible to accounting errors and fraudulent activity. Generally, funds are more limited than in larger companies so there is less of a budget to look after these pressing issues. Also, while larger organisations typically have strict auditing procedures and schedules, smaller operators don’t always have the same resources to implement these practices.
Let’s take a look at some simple steps you can take to ensure that your SME avoids accounting errors and fraud in the future.
Catch Issues Early
As with anything else in life, prevention is always better than cure. The sooner you can catch any anomalies in your business accounts, the quicker you can make changes to solve the issue and prevent it from happening again in the future. Conducting regular audits of your accounts or carrying out a bank reconciliation is a great place to start.
By matching the cash balances of your business’s balance sheet to the corresponding information on your bank statements, you will quickly be able to see if there are any errors in your finances. These can be due to accounting errors or fraudulent activity in your business accounts. Once you have the right information, you can go ahead and take the appropriate action.
The job of establishing accounting and auditing procedures in SMEs is often given to one person. While, in theory, the simplicity of this tactic will make things run smoothly for your business, the reality is that you are reliant on the accuracy, honesty and integrity of one individual. Always aim to have your financial transactions go through at least two employees to avoid both errors and fraud.
Alternatively, a simple, more modern way to overcome this issue is through the use of accounting software. You will avoid human error in your accounting records and the possibility of fraud in your accounts while at the same time saving on accountants fees without having to take on the role yourself.
Avoid Manual Payments
When it comes to fraud, one of the most common ways for it to happen is through manual payments. If an employee pays for something in cash or by cheque, it’s very easy to take a little more than is necessary, fail to return the change after making the payment or even writing a second cheque in the same amount but made payable to themselves.
To avoid these forms of fraud occurring in your SME, restrict manual payments or remove them altogether. Consider using a company credit or debit card for payments or using online banking and other payment options instead of cash. With computerised systems, it is much more difficult for someone to take money and also much easier for you to detect and resolve the issue.
Take the Right Steps and Avoid Fraud and Accounting Errors in Your SME
No matter what industry you are in, there is always a chance of accounting errors and fraudulent activity taking place. Sometimes, it can be due to a simple mistake on the accountants part and other times it can be much more malicious.
Always be sure to conduct regular financial audits so you have more control over your finances. Be sure to divide financial responsibilities between numerous employees and consider using financial software and other online tools where you can to eliminate human error. With the right approach, you can avoid potentially harmful activity in your accounts and keep your business finances on the right track.