Many small business owners assume an employee would never steal from them because of the nature of close relationships at their small business. In addition, the majority of small business owners have never been trained on preventing loss from employee theft.
Employees don’t just steal cash – they may be stealing inventory and materials that go into manufacturing, tools and equipment.
Here are some startling statistics;
· Approximately two-thirds of all small businesses have experienced some type of employee theft.
· Recent estimates show that employee theft is costing businesses in the US $50 BILLION per year.
· Studies show that 75% of employees have stolen from their employer at least once.
· 33% of bankruptcies are directly related to employee theft.
So, how do you safeguard your small business from employee theft?
Segregation of duties
This is a fancy way of saying that one person shouldn’t have full access to the asset, the accounting system, and the reconciliation process.
When someone has access to the bank account, and the accounting system, and reconciles the check book, it’s fairly easy for them to take cash, record it in the system in a way no one will notice, and reconcile the account.
Separating duties means that in order to steal, two people have to work together to do it. This reduces the risk of theft as most employees don’t want to bring another person into their theft.
Small business owners often complain that they are too small to segregate duties. Looking at bill pay apps to help implement this practice may be a big benefit to a business with handful of employees.
By the way – this should include your bookkeeper. No matter how honest you think your bookkeeper is, it’s important to maintain controls over your cash. In a perfect world, your bookkeeper should not have full reign over your bank account.
Review your bank statement on a regular basis (and be the first one to open the statement)
This isn’t a huge control you can have in place to prevent loss, but hopefully will catch it soon after. While this process is really meant to detect issues, this does create a little bit of a deterrent as your team knows if they do something sneaky with your bank account, you’re likely to catch it as soon as you see the bank statement.
You should be looking for unusual payments or deposits into your bank account, vendors you don’t know, extra payroll checks, and examining the canceled checks to make sure your signature is valid.
Require employees to take a vacation
When a team member is up to no good, a lot of times they need to stick around the office all the time to keep covering up what they are doing. If another employee has to cover for them for that week of vacation, a lot of times that employee may notice discrepancies and start asking questions that uncovers the theft.
Watch for tip-offs in employee behavior
Keep an eye out for expensive cars, vacations, hobbies, etc. that you know aren’t something that can be supported with the current salary you are paying that employee.
Give customers a reward for not receiving a receipt
Ever wonder why your favorite fast food restaurant gives out rewards if you don’t get a receipt? It’s to make sure that each sale gets rung up in the register so that the cashiers can’t pocket the cash. If all sales are rung up, it’s easy to determine if the till is missing cash at the end of the night.
And an extra one to add to the list
Maintain strict inventory controls! Make sure your team is giving the right quantity of goods that have been sold – this holds true from the alcohol at the bar, to the fabric at the cutting counter at your favorite sewing shop. Use an inventory tracking system that allows you to compare the expected on hand by units purchased and sold compared to actual to help you identify unusual variances.
Have you used any of the above practices for preventing employee theft? How have they worked for you? Let us know in the comments