No matter the size of your company, every business owner should be alert to the problem of employee theft. Before you decide to hand your record keeping over to a qualified employee, make sure you have the proper controls in place.

How to Spot Employee Theft

Employee fraud usually develops over a period of time and can involve employees with outstanding track records. Look out for employees that are under new pressures such as:

  • Unusually high medical bills
  • Living beyond financial means
  • Excessive alcohol or drug use
  • Large investment losses
  • Excessive gambling

Identify Problem Areas

Are there circumstances in your company that make fraud or embezzlement easy? Small companies can find it especially difficult to segregate the duties of employees which can increase the chance of loss. Here are some problem areas to consider:

  • Are your accounting records inadequate?
  • Is one employee handling too many related transactions?
  • Does your staff have a relationship that is too close to specific staff members of your suppliers?
  • Is there an employee that takes very brief vacations or no vacations at all?

Steps to Prevent Employee Theft

As a small business, you may have too few employees to properly segregate the duties but there are steps you can take to prevent employee theft.

  • Stay close enough to the business transactions so you can spot unusual problems with the receivables, payables, refunds, etc.
  • Ask questions about your accounts receivable balances.
  • Open the bank statements and review them to look for any unusual checks, odd vendor names, etc.
  • Open all incoming mail from customers and vendors.
  • Conduct random spot checks in different areas of your business.

Employee theft doesn’t happen to every company, but you should still be aware of the possibility. It’s not necessary to become paranoid that it will happen to your business, but you should have a system set up that makes fraud less likely.

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