Of course, you want to trust the people you hire to work at your small business. But sometimes, you get a bad apple.
Employees might steal money, goods, and knowledge from your business. You need to implement employee theft prevention strategies before fraud starts.
Below we’ll look at types of employee theft, followed by employee theft prevention tips.
Common types of employee theft
To better prevent employee theft, let’s first look at the types of theft.
Common types of employee stealing include:
- Larceny (outright theft)
- Skimming (diverting business funds)
- Fraudulent disbursements (billing schemes, inflated expense reports, check tampering)
- Theft of materials (raw materials, inventory)
- Stolen business opportunities (misuse of customer lists, leaked trade secrets)
You need to prevent and watch out for those types of theft.
Signs of employee stealing
So, what are key signs that an employee is stealing? If you notice any of these common signs, you might have a thief among your staff.
- An employee is suddenly extremely devoted to their work.
- An employee starts working late or is picking up more hours.
- An employee starts living beyond their pay level.
- An employee objects to business changes that affect finances or inventory.
- An employee is moonlighting and using tools and materials that are available at your business.
- An employee starts showing compulsive gambling behaviors.
- An employee abuses drugs or alcohol.
Of course, these signs don’t guarantee that an employee is stealing. You might see an employee living beyond what you pay them, but they might have a spouse who earns a lot more. Or, an employee might have a gambling problem but doesn’t steal from your business. Don’t make assumptions and falsely accuse employees. Try to find multiple clues and talk to employees about their changes in behavior.
Employee theft prevention tips
It’s best to stop employee theft before it starts. Check out the following ways to prevent employee theft.
Know your employees
You need to know your employees and their work histories. Don’t hire the first nice person you meet. Check their background before you extend a job offer.
Perform background checks on all potential hires. A background check will tell you about criminal histories, education and employment histories, credit histories, and driving records.
You should also check references. Ask candidates to give you several contacts of references. They can be professional and personal references. Call the references and ask them to verify the candidates’ education or employment. Also, ask them about the candidates’ characters.
When you closely supervise your employees, you can possibly prevent workplace theft. You will see what employees are up to and observe any irregular behavior.
Now, you don’t have to look over your employees’ shoulders constantly. That would create a work environment where employees think you don’t trust them. But, you should periodically check in on what employees are doing. Talk to them about their projects or tasks.
Limit who has access to your company computers and the information on them. If employees don’t need access to computers or certain files, don’t grant them access. For example, not all employees need access to your payroll software.
You should also regularly change passwords. And, you should use a different password for each account. By periodically changing passwords and using unique passwords, you make it more difficult for employees to crack them.
Create an accountability system
If you let employees handle money, you need an accountability system. One employee should not have full control of your business’s money.
Have more than one person handling your business’s money. That might be two employees. Or, you might be the second person.
By having two people looking out for the money, there’s a lower chance of misconduct. If one person does improperly handle the money, hopefully the other person will come forward with the fraud.
You can prevent employee theft by doing regular internal audits. When you do an audit, you review your business’s financial records to verify that they are accurate. The audit is intended to find problems in your records, such as missing money or incorrect data.
Many businesses do a large audit once per year. You can do the business audit yourself or hire an accountant to do it for you.
When you conduct regular audits, you can spot employee theft. You might see where an employee has been skimming, altering records, or outright stealing. The more frequently you do audits, the faster you can spot problems.
You might also consider doing unannounced audits. If you always do audits during the same period, a thieving employee might know when to cover their fraud. But, an unannounced audit can throw off an employee who is doctoring your books.
By monitoring your business’s accounting, you can keep your eye out for possible employee theft. To do that, you need accounting software that’s easy to use and pull information from.
This is not intended as legal advice; for more information, please click here.