Employee theft is something that most business owners don’t want to experience. However, many companies do experience at least some level of embezzlement. Technically speaking, embezzlement is malfeasance that diverts company funds or theft done by an employee. According to the 2014 Global Fraud Study done by the Association of Certified Fraud Examiners (ACFE), it can take businesses years to recover from this type of loss.
One of the best ways you can stop embezzlement is to be aware of the warning signs and take steps for prevention. There are a lot of signs that can show you when one of your employees may be taking advantage of their position in your company. You have to know the warning signs, what you can do to prevent it and what to do when you find out about it.
The Warning Signs
You need to be on the lookout for these signs. The sooner you recognize that embezzlement is taking place, the better chance you have of recovering. Typical embezzlement signs include:
- A change in spending habits of an employee, such as buying extravagant cars or lots of gambling
- Disorganized company records, missing documents or an unexplained change in record-keeping
- An unusual drop in profits
- A lot of credits to one customer or payments going to the same address
- An employee with a close relationship with vendors
- Customers complain about already having paid a certain bill
- Altered check amounts
- Disappearing petty cash or office supplies
- Ledgers don’t come out balanced
- An employee refuses to take time off or becomes hostile at reasonable questions
Being on the lookout for these types of signs can help you catch embezzlement before it becomes a company-altering problem.
Knowing the warning signs is just one part of the battle. Many companies find they can prevent their employees from stealing by making daily deposits and monthly reconciliations. This means that your accountants should never leave cash sitting around and should compare ledgers and bank statements regularly. You should separate the financial duties. For example, the employee who reconciles the bank statements should not be the same employee who writes the checks.
Keep detailed records of finances. This should even include petty cash. Know how much money you have in petty cash, record why an employee needs petty cash and make it a chore to get to. You can also make sure that all travel expenses are supported by receipts and other paperwork. Keeping these detailed records will make it harder for someone to steal without you knowing.
You can help prevent embezzlement by walking around. The more you’re around, the fewer chances an employee will have to steal from you. You should also communicate a message of employee honesty from the get go. Let employees know that you will prosecute should anyone be caught stealing from the company. Walk them through the employee handbook, so they know what expectations you have of them.
Once you catch an employee stealing, you have to promptly prosecute them. You are doing no one any favors if you wait to get law enforcement involved. If you are lenient on one employee, you are just inviting more to start stealing from you as well. As soon as you find out about theft, you need to be ready to prosecute.
This means that you will have to work with a company attorney. Your attorney will be able to help you take the right steps in both prosecution and prevention. If you work with an attorney who has experience with these types of cases, you will be better prepared.
Unfortunately, there are a lot of employers out there who will have to deal with employee theft and embezzlement. Make sure you’re prepared by learning about the warning signs, taking steps of prevention and being ready to prosecute.
The content on our website is only meant to provide general information and is not legal advice. We make our best efforts to make sure the information is accurate, but we cannot guarantee it. Do not rely on the content as legal advice. For assistance with legal problems or for a legal inquiry please contact you attorney.