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10 Ways to Reduce Employee Theft

10 Ways to Reduce Employee Theft

Employee theft is among the severe issues small business proprietors are facing these days. According to the NFIB (National Federation of Independent Business), a worker is 15 times more likely to steal from an employer than a non-employee. Employees are responsible for an estimated 44% of losses in stores as a result of theft, and research from the U.S. Department of Commerce shows that employee fraud or theft is the cause of approximately a third of business failures.

Entrepreneurs are rightly worried or ought to be. Employee crime takes many forms. This can be outright theft (larceny), misappropriation of resources or inventory, or diverting company thefts. Additional forms of employee theft include fraudulent payouts (excessive expense reports, billing schedules, and check manipulation) and stealing business chances (misappropriation of trade secrets or client lists).

Employees who steal usually work for a company for some years before stealing and may go on for three years, on an average, before you catch them. For a company, having such a thing happen means substantial losses. Below are some tips to prevent such losses.

Know Your Employees

It is recommendable that small companies’ employers conduct background checks on possible hires. (Also see our article on how to choose the best employees.) Checking references is a good move; however, for employees charged with financial records or handling your money, background assessments are better.

Be alert to possible theft signs, such as sudden apparent commitment to work and keeping working, lifestyles far above wage level, strong opposition to procedural adjustments related to supply, inventory or financial issues, and alcohol and drug abuse. Also, moonlighting with resources available in stores, evidence of persistent borrowing, compulsive gambling, or fraudulent checks.

Closely Supervise Your Employees

Not surprisingly, reports indicate that fraud and theft increase when surveillance is not involved. This does not imply looking over your employees’ heads every second, but it means checking what they are doing. It is also sensible to have several people overseeing your money.

Use Purchase Orders

Formulation of purchase orders, receipts, and payments must be separate roles operated by different people. Always check incoming orders and use pre-numbered orders.

Check Your Business Receipts

Use pre-numbered receipts and perform weekly audits. A person other than the sales associate should register and balance receipts.

Make Use of Informal Audits

Conduct random internal audits and have an annual audit done by an outside company.

Install Computer Safety Measures

Be familiar with your computer software and systems and their usage to derive inventory or money—control access to computer records and terminals. Change access codes regularly and frequently check that safety procedures are in place.

Track Your Checks

Always use serially pre-numbered checks, with payees and amounts written or typed in permanent ink. It is highly recommendable that you perform all checks from financial software such as QuickBooks. Lock your signature machine and blank checks (if you own one) in a safe place.

Use Security Systems and Manage Inventory

Separate functions for storing, receiving, and sending physical inventories must be done yearly by persons not accountable for inventory records. Some companies also make use of security equipment to monitor inventory or merchandise.

Beware of Debtors

Make opening and posting separate mail functions—record cash and checks in the appropriate stamp checks and registers for deposit only.

Using Asset Stickers to Help Prevent Theft

Custom asset stickers may assist you in reclaiming thousands of dollars in equipment. With them, you can label equipment ranging from laptops to smartphones. High-quality asset labels are available and will stick to aluminum, plastic, foil, and metal; the adhesive is designed to be next-to-impossible to remove.

Final Thoughts

Provide employees with a way to report fraud or theft by colleagues. Even though this might be beneficial, do this carefully to avoid mistrusting employees. If you suspect an issue, it is advisable to conduct investigations and make allegations. A false accusation could lead to a court case against you.

Check suspicions through investigation and establish the theft extent and the methods used. If possible, identify the accountable worker, dismiss the employment, and consider legal action. If the problem is complex or large, consider engaging legal counsel to help find additional professionals such as investigators or forensic accountants.

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by Lottie Pritchard // Lottie Pritchard is a contributor to Businessing Magazine.

Opinions expressed by contributors are their own.