Employee Theft

According to the U S Chamber of commerce, employees steal between $30 to $100 billion each year, and is the reason for 30% of business failures. Theft can include taking money from the till, embezzlement, stealing intellectual property, walking away with inventory. Without excellent controls in place, you may be vulnerable to employee theft. Here are some things you can do to prevent it.

Embezzlement

A trusted employee, writes extra payroll checks to self, or pays bogus invoices perhaps to accounts set up by self, or checks to cash. Sometimes the employee abuses check signing privileges, or alters a check, or forges the owner’s signature.

Prevention of embezzlement includes:

• Background check of any employee handling money
• Being wary if employee appears to have money problems or overwhelming personal problems (family health issues, etc)
• The business owner, or outside accountant, should open the bank statements and examine each check to verify the payee, amount, and signature
• If practical, the owner should sign checks, or two signatures should be required
• If possible, someone other than the person who writes checks should balance check book

Theft of incoming receipts
An employee diverts incoming cash or checks to his own account or a dummy bank account.
Prevention includes:
Carefully watch receivables

• Personally investigate if customers complain they are not getting credited for their payments. Get cancelled check copies and examine front and back to determine if they were properly deposited in your account
• Have two employees involved in counting and verifying receipts

Cash theft

Employees who receive cash in retail establishments “dip into the till”

Prevention includes:

• Establishing and following rigid cash out procedures that verify that the starting cash plus the receipts  (printed from the register) for the day equal the ending cash
• Verify that the cash deposits equal cash receipts
• Personally investigate customer complaints of receiving incorrect change

Inventory or equipment theft

Is your inventory or equipment “walking out the back door”?

Prevention includes:

• Keeping a record of company owned equipment, including serial numbers
• Tag all company owned equipment
• Keeping a record of inventory, including incoming and usage
• Verify inventory levels with periodic physical inventory counts
• Be suspicious of inventory shortages, or higher than normal inventory purchases

Intellectual Property Theft

Could a disgruntled employee walk out with valuable intellectual property, such as secret formulas or customer lists? Your business could suffer dramatically if such information were to get into the hands of competitors.

Prevention includes:

• Having all employees sign appropriate agreements relating to your intellectual property
• Having a clear written policy (in the employee manual) about company intellectual property

Most fraud the theft are preventable – but you, the business owner, must be vigilant and be totally intolerant of any and all fraud.

Will Limkemann
Siqua Group Ltd.