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Preventing Employee Theft

One of the most distressing things to face is finding out that a trusted employee is stealing from you. Sadly, it is more common than most people think.

Theft and fraud can take many forms:

• Stealing of supplies and petty cash
• Creation of fictitious employees
• Exaggerating or fabricating expense reports
• Running a personal business on company computers
• Excessively using corporate time to complete personal tasks
• Shipping and billing scams
• Creating false vendors
• Stealing and forging checks

Most employers think that it can’t happen to them because they have hired trusted employees or their employees have been with them for multiple years. But what they don’t realize is that the typical perpetrator is a first-time offender.

The offense often starts because the employee is facing financial troubles and often just “borrows” money or supplies, but then has to steal again to cover the initial crime. In other cases, the employee feels justified, believing that the employer owes him more than he is being paid.

What should be really frightening is that the average time it takes for an employer to catch a fraud scheme is 18 months, and on average, 42 % of fraud victims recover none of their loss.

Prevention

• Segregate accounting duties and change who has what duty at random intervals
• Have easily readable and organized invoices and shipping records
• Minimize the amount of cash on-hand
• Keep blank checks locked up
• Have payroll additions done by a different person than the person who runs payroll
• Follow up on customer complaints about credit for payments
• Conduct background/credit checks on all employees
• Secure fidelity bond dishonesty insurance
• Include an anti-theft policy in your employee handbook

If you suspect employee theft, don’t wait to begin an investigation. If you find evidence of a theft, you should contact your attorney for steps how to proceed.

If you decide to confront the employee, keep calm and allow the employee to explain. Although you would not want to keep that employee, you may find in the explanation that additional fraud had occurred or other employees were involved. Don’t threaten the employee to get your goods or money returned as it may be seen as blackmail and hurt your case in the future.

The best way to stop employee theft and fraud is to prevent them from happening in the first place. Be clear in your policies and make sure that they are followed. Hire trustworthy employees and pay attention to them over time. Your business may be at risk if you don’t.