How to Protect Your Business from Employee Theft

Employee theft happens frequently enough for it to be a concern of every business. It makes no difference whether your business is a one-employee medical office or a forty-employee retail outlet. Absentee business owners should be even more alert to the problem of employee theft.

Busy managers find it easy to turn the record keeping over to a qualified employee. Don’t do so without proper controls and constant review.

Some examples of employee theft

Consider these examples of the methods by which employees have been known to steal from their employers:

• Opening a checking account in a nearby community under the same name as the employer company.
• Overpaying the payroll taxes or large suppliers and asking for refunds which are then deposited in the employee’s new company account.
• Convincing the employer that the independent accountant is an expensive luxury which the company can do without now that the employee is available to do financial statements.
• Soliciting the help of a supplier’s employee, then overpaying the supplier and sharing the overpayment.
• Opening a checking account with the same name as the employer’s major suppliers and then paying invoices twice. The first payment is sent to the supplier, and the second is deposited in the employee’s “extra supplier account.”

Some small businesses have paid a high price to learn about employee theft. Don’t be lulled into thinking it could never happen in your business.

Learn to spot employee theft

Whether your business deals in products or services and whether you have one employee or many, you should be aware of the signs of employee fraud or embezzlement.

Fraud most often develops over a period of time and will sometimes involve employees with outstanding track records. What would cause a long-term, trusted employee to go bad? Watch for employees who are under new pressures such as:

• Unusually large medical bills
• Living beyond their financial means
• Excessive use of alcohol or drugs
• Large investment losses
• Excessive gambling

Also, watch for a growing disregard for the company in favor of personal gain.

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