Employee theft is rarely something companies think about until it’s too late. However, taking the appropriate preventative measures to prevent embezzlement is far easier than the significant cleanup work required when victimized by employee theft.
How to Prevent Employee Theft
What are the steps that you can take to minimize embezzlement? Here are several quick and actionable tips:
1. Acquire employee theft insurance.
Even with every safeguard in place, embezzlement is always possible by employees or business partners. Theft insurance is relatively inexpensive, especially if there is a significant deductible.
2. Designate someone different to reconcile accounts.
The most frequent source of embezzlement is checks written by the dishonest employee to fictitious vendors. The owner of the company trusts that same employee to reconcile the returned checks, which means embezzlement could go on for months or even years undetected.
That’s why it’s important to have someone else reconcile the checks and verify the expenses being submitted. Even expenses to current vendors should be examined because a check could be diverted from the normal flow of payments.
3. Perform regular audits.
Embezzlement is often discovered when something unexpected happens like when the dishonest employee has to take a sick leave or there is some family emergency.
Enforce a vacation audit while the bookkeeper is gone making sure the bookkeeper is not present during the audit because frequently he or she can manipulate the books if they are present
4. Get background checks.
A background check for new employees is always a good policy, particularly for those who will be handling large amounts of money.
However, in my experience, a new employee is rarely the culprit of theft. It is almost always the employee that has been there a long time and knows the system.
5. Maintain backups of your records and passwords.
One of the best ways to deter embezzlement is to make clear to your back office employees that all data is being preserved off site and that passwords are subject to controls.
6. Monitor company assets.
Closely monitor company credit cards that may be used for personal reasons unrelated to company business. If tolerated, this can create a tax liability for you or the employee since it may be considered income.
Never assume that your business will not be the victim of employee theft. Putting the proper checks and balances in place will help protect your company and keep it profitable.