Employee theft is a $40 billion dollar industry, according to authors Mark Lipman and W.R. McGraw. That figure was reported back in 1988, and with employee theft on the rise, it’s likely that number is significantly higher. Some estimates say that close to one-third of employees steal from their employees sometime during their career.
While some small business owners turn a blind eye to employee theft thinking it is just another cost of business, there are several things you can do to protect your small business from employee theft.
1) Set a strict policy. Make it clear to your employees that you have a zero-tolerance policy toward employee theft. If an employee is caught stealing from you, of course it is up to you whether or not you prosecute criminally, but at a minimum consider terminating employment/
2) Add internal and external internal controls. Checks and balances are a good thing when it comes to combating employee theft. Always have a second pair of eyes — both within and outside your organization — checking critical financial numbers.
3) Segregate vulnerable job functions. For example, separate the functions of preparing monthly bank reconciliations with reviewing monthly cancelled checks and bank statements. Another function that should be separated is the preparing and signing of checks.
4) Lock up company checks. Control company checks by keeping them in a secure location; and only give access to blank checks to authorized employees.
5) Review online banking procedures. If your small business uses online banking, you can help protect your small business from employee theft by separating the tasks of reconciling online banking statements with entering payments online.
6) Monitor inventory. It’s not just money that dishonest employees are often, it can be your supplies, material, and even the products you sell. Make sure you have a strong inventory monitoring system in place that alerts you if inventory levels are dropping for reasons other than sales or deliberate reductions in stockpile.
7) Hire trustworthy employees. While there is no guarantee that every employee you hire will be completely honest and trustworthy, you up the odds by conducting background checks, credit checks, thorough interviews, and reference checks when hiring new employees.
It’s arduous enough that small businesses have to deal with a host of challenges in today’s tough economic and competitive environment that dealing with the enemy within (i.e. employee theft) shouldn’t be one of them. But unfortunately it happens, and it’s up to you — the small business owner — to keep your employees honest, at least while at their workplace.