She didn’t want to raise any flags at the awning manufacturer that employed her, because the Santa Ana Police Department’s Economic Crimes Detectives just audited her employer’s books and determined that she stole $352.997.33 from them over four years. She’s currently charged with 109 counts of forgery. One hundred and nine!
The reason that businesses should have internal control processes is because they trust their employees. After all, if you didn’t trust them, you wouldn’t need processes – you’d be looking behind them constantly.
But none of your employees are so trustworthy that you should put the entire company’s future – and the paychecks that support the families of every single one of your employees – on a single employee’s shoulders. Even business owners don’t get that level of trust! That’s why businesses have to pay unemployment insurance tax.
Internal controls are processes you build to ensure that money isn’t misappropriated. Generally speaking, misappropriated means “stolen.” SCORE provides a list of 17 controls that every business should have in place, and many of them are designed to catch changes in monthly inflows and outflows that might indicate fraud. But companies with internal controls quickly discover that they have many other benefits.
Creating procedures that monitor financial transactions requires organizing all transactions weekly or monthly, and capturing them in a place they can be reviewed. Once that’s in place, revenue forecasting becomes less intimidating. This leads way to budgeting, which leads to better bottom line returns. That’s why companies with internal controls are often more profitable even if all the time spent building and enforcing these processes never leads to a single fraudulent transaction being discovered.
Capturing, categorizing and examining individual transactions also leads to the question, “Should we really be spending money on this?” That’s true at all levels of the organization – including at the level of the front-line employees buying the item or service. When the leadership of a company makes cash flow management a priority, it can change the way employees think of repeated small transactions that provide little value to the company and collectively pull tens of thousands of dollars away from the bottom line.
It’s true that building internal processes takes a lot of time, and that maintaining them is even more time consuming. It can be hard to see how all that work will pay for itself over time when you’re in the middle of rolling it out. But if you don’t do it for the financial discipline it brings, do it so Martha Jean doesn’t embezzle so much money that your life’s work ends in bankruptcy court. Your employees probably won’t thank you – but they should.
To learn how WingSwept can help your company improve its processes through better use of technology, call us at 919-779-0954 or email us at Team_WingSwept@WingSwept.com.