No small business owner wants to believe employees are stealing from his or her small business—and thankfully, most workers are diligent, hardworking and honest. Nevertheless, employee theft is a major problem for American businesses. U.S. Chamber of Commerce estimates put the costs of employee theft at more than $50 billion a year.
What constitutes employee theft? Broadly speaking, it can include everything from embezzling funds and stealing business-owned merchandise or property to lifting twenty-dollar bills from a cash register. As a small business owner, you have to learn to recognize the warning signs that theft or other forms of dishonest behavior is occurring in your business.
Here are “types” of people to watch out for:
- Chronic violators: Employees who regularly break company rules and regulations (suggesting the possibility they might be thieves as well).
- Substance abusers: An employee with a drug problem will need cash to fuel his or her addiction.
- Disgruntled or “wronged” employees: A person who frequently complaints about being treated badly at work can easily justify stealing from the business.
- Habitual liars: People who play fast and loose with the truth are prepared to tell big lies when it comes to stealing from the business.
- Excessive explainers: Employees who go to great lengths to explain inconsistencies or mistakes in paperwork might have something to hide.
- Employees who keep odd hours: When an employee regularly comes to work 30 minutes before early – or stays 30 minutes late after everyone else has gone home – might be using that time for nefarious purposes.
- Big-spending employees: Someone whose lifestyle appears to exceed what their salary might provide for – as illustrated, for example, by the purchase of expensive jewelry or a new car – should raise a red flag for his or her employer.
So how do you protect yourself against illegal actions by such employees?
Start with the hiring process. To begin with, you should conduct extensive background checks on all prospective employees. You need to know all you can about an individual’s past work experience and any record of encounters with law enforcement. A thorough background check includes verifying the candidate’s previous employment; any history of criminal conviction; and a check of his or her references.
“At a minimum, you should check the background of any prospective employee who will have constant access to cash, checks, credit card numbers or any other items that are easily stolen,” says Joseph T. Wells, president of the Association of Certified Fraud Examiners.
A comprehensive background check will weed out many potential wrongdoers – but it’s not a foolproof approach. To further protect your valuable business interests, adopt a proactive stance against possible theft:
- Let employees know you have established systems to detect theft and fraud. People who think they might be caught in the act may be deterred by this information. (Installing a closed-circuit TV sends a clear signal of a zero-tolerance policy for employee theft.)
- As much as you can, separate the function of handling incoming checks and cash with the function of doing the paperwork that accounts for these funds.
- Arrange for your business banking account to require two signatures (for deposits and withdrawals) and be sure the bank is aware of this business policy.
- Don’t use a signature stamp as part of your accounting practice. And, in general, keep on the lookout for strange or unexplained transactions or other bookkeeping irregularities.
- Restrict the number of employees permitted to handle other employees’ sales, thus decreasing the allure and opportunity for collusion.
It’s possible you have the most honest workforce of any small business in America. That doesn’t mean you should assume employee theft can’t possibly occur in your workplace. Such an assumption only plays into the hands of the bad guys.