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June 24, 2014
5 Ways to Protect Your Company From Employee Theft
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According to the U.S. Chamber of Commerce, 75% of employees steal from their employers, with the majority of those doing so repeatedly A typical business loses as much as 5% of revenues due to employee fraud. This margin could be the difference in keeping your doors open or shutting them!
Employees are 15 times more likely to steal than a non-employee (according to the National Federation of Independent Business).
Staggering figures like these may be hard to accept, but unless set policies to minimize theft are in place in advance,your business could be very negatively effected by employees with sticky fingers.
Why Employee Theft Happens
There are 2 obvious reasons why employee theft is such a prevalent problem.
Opportunity - most businesses are vulnerable to employee theft. Many business owners delegate day to day bookkeeping, banking, and accounts receivable responsibilities to one or more employees, usually those who are most trusted.
As an owner, you may have a ballpark sense of your banking and accounts receivable information, but for the most part, you concentrate on your work and leave the "number-crunching" to others.
Motive - Once an employee is caught stealing, the motive usually becomes clear. The employee may have an unknown addiction - to gambling, drugs or something else. The employee may simply be living beyond his or her means. Some employees justify stealing by feeling the company owes them something 'more'.
Often, an employee rationalizes the theft while continuing to steal larger and larger amounts. The employee may have more sinister and specific motives, such as harboring bitterness at being passed over for promotion or being demoted and intent on proving that he or she is too smart to get caught stealing.
Measures should be put into place to protect your company from employee theft. Here are five tips for preventing or stopping employee theft:
- Create and enforce a policy which discourages theft. An effective policy must address actions like pilfering inventory, stealing cash, skimming off vendor deliveries, accounting fraud, and forging or hiding receipts. Put your policies and procedures in writing — and provide them to every employee. It should be understood the penaltiest employee fraud may include immediate termination and legal action.
- Screen before you hire. Business owners cannot affort to forego or skimp on a background screening report. Check public records for any civil and criminal history for relevant lawsuits, frequent or serious driving violations, and anything involving violence or fraud. Call all references and ask in depth questions about the candidate.A comprehensive background screening report may alert you to past issues that would not be advisable to take on.
- Conduct random audits. In addition to regular audits, conduct unannounced financial and fraud assessments. These surprise audits not only alert you to possible weaknesses in your system, but also make a clear statement to employees that you’re serious about fraud prevention.
- Create a culture of “theft prevention awareness.” A few basic precautions can help establish an atmosphere of vigilance, rather than fear and blame. You’re the person in charge, so it shouldn’t come as a shock to anyone if you happen to do a spot inspection of a shipment or check the cash register from time to time. Make sure business records are organized and kept up to date, so you can easily review them whenever you choose. Encourage your staff to report suspicious activity or potential violations of policies and procedures.
- Maintain a healthy relationship with your employees. You can prevent or minimize theft in the workplace by maintaining healthy relationships with your staff. Employees who are paid fairly, who can approach you with issues and concerns, and who feel empowered to make decisions and take action are far less likely to steal from you than those who feel cheated or undervalued.
Employers should put a top priority on creating process for minimizing theft in the workplace. The success of the entire company could be dependent on it.