8 rules you need to know in order to eliminate stealing from your company
Global statistics show that 10-15% of the company’s turnover loss is due to fraudulent actions of the third parties. Ukrainian statistics shows that more than 30% of losses incurred due to fraud (ed. – IT fraud) in companies.
What is usually at the mercy of fraudsters?
- First of all, the company’s assets:
- movable property;
- real estate;
- the company’s reserves;
- cash on hand;
- intellectual property: process sheets and formulations;
- corporate rights, etc.
- Next, illegal misrepresentation of financial statements for various purposes. Misinformation of a shareholder, as in the case that was investigated recently. In this example, top managers of a well-known company managed to pay royalty to the owner from credit funds.
Hence the rule: if you are the owner and you decide to get out of operational control, you need to:
- a) set metrics to check your business success barometer through the prism of various KPIs: gross margin, EBITDA, net profit, retained earnings etc.
- b) appoint an external independent person or an audit company (necessarily with a global brand and the reputation that could be lost) that will check the reliability of these indicators in order to avoid the above-mentioned case, where the credit funds were used to pay royalty to the shareholder, while the company incurred real financial losses. The owner thought he was doing great, and he could enjoy his vacation. In fact, the financial indicators were artificially increased, but the company was actually brought to bankruptcy, market share was lost, and the amount of debt amounted 10x to EBITDA.
- Different kickbacks. According to global statistics, 90% of fraud cases are recorded in the procurement of raw materials. For example, an employee of the procurement department colludes with a supplier of raw materials and artificially increase the purchase price in sales. When selling, the commercial department makes the maximum discount and completes the sale with the net loss. The first and last manipulations are possible when the company does not have a clear procurement and sales policy.
How to minimize such fraud actions?
You should build a maximum number of anti-fraud barriers, each of which will be more expensive than the previous one. In this way, fraudulent actions committed by intruders will become financially inexpedient.
Stealing from your company will be a costly affair providing that the following rules are implemented:
- automatization of all processes;
- division and digitalization of the business;
- distribution of authorities and responsibilities among the managers;
- conducting an annual spontaneous forensic procedure;
- conducting a mystery shopper procedure;
- creation of an internal control system at your company: regulations, policies, compliance system, RCM (risk control matrix);
- whistle blowing system — feedback system, etc.;
- order a spontaneous procedure regularly, and then you definitely will be able to refract both local and global statistics of frauds;
- a spontaneous regular forensic procedure will definitely enable you to refract both local and global statistics of frauds; make sure the intruders do not stand a chance.
Test your business by using forensic. Then you will know exactly what your business and your team are worth.