The Association of Certified Fraud Examiners estimates that businesses lose an average of 6% of annual revenue due to fraud. Fraud is an intentional act, such as using the company credit card for personal items or inflating sales volume to earn a commission. That 6% loss estimate does not include lost revenue or excess costs due to errors.
Errors cost money that can really add up — paying invoices inaccurately or more than once; misapplying supplier credits and discounts; paying for goods or services not received; not collecting accounts receivable; and not billing for all provided goods or services.
Time and money spent on correcting errors are not available for operating the business. That creates a vicious cycle that eats up resources. Small businesses and non-profits are at a higher risk than average because they have fewer resources to being with. To mitigate that risk, business owners and non-profit leaders can take steps to prevent errors and reduce fraud opportunities.
Two important steps to controlling costly errors and reducing waste are training and periodic monitoring.
Even when you hire qualified people, they need to understand that business’ or non-profit’s methods and processes. They also need an understanding of objectives, goals, and expectations. Training new employees and volunteers not only gives them the tools needed to get the job done, it’s a way to make new people feel they are part of the team.
Most people come to work wanting to do a good job. However, mistakes happen. Tasks and objectives could be misunderstood. Periodically monitoring that processes and methods are being followed detects errors and allows for corrective action. Those actions could involve additional training or clarifying procedures. Fraudsters will also be deterred when they know that periodic monitoring is performed.
Adopting methods and processes helps businesses and non-profits control errors and waste, and reduce fraud opportunities. Training and periodic monitoring provide confidence that methods and processes are working as intended toward the achievement of business objectives. That translates into lower costs and higher focus on running the business or non-profit.