Employee embezzlement is a common occurrence in every type of business. This unethical practice is causing companies to lose a significant chunk of revenues and annual profits. Studies found that trusted employees steal from a company more often than newcomers. Moreover, companies lose a staggering 8% of annual revenues and profits due to employee theft or fraud. Prevention of employee theft or embezzlement may seem hard at first glance, but it is certainly not an impossible task. Those who can develop a theft prevention mechanism can save a lot of hassle for their businesses.
Business owners must learn the art of the game before tackling unlawful and unforeseen activities. No matter how seasoned your employees may be or how much trust you have in them, you should never trust them blindly. There must always be proper checks and balances in place to prevent your business from employee embezzlement. In America alone, businesses lose around $60 billion each year to employee theft or fraud, which is why 33% of businesses filed for bankruptcies in the same year. The most common practices of employee theft or fraud are theft of cash, merchandise, payroll, sensitive information, or more.
Who Is the Embezzler and What Are the Warning Signs of Employee Embezzlement?
An embezzler is usually an employee perhaps with 4-5 years of experience working with the company or more. The person is usually described as an honest, highly desirable, trustworthy, motivated, and bright and is considered a good, above-average individual. Undeniably, the major motivation behind the wrongful acquisition of cash, goods, and the sharing of sensitive information is money.
Potential warning signs of employee misconduct are:
- A change in an employee’s habits and behavior
- Lack of interest in completing their tasks
- Poor time management in updating or reconciling the business books or accounting records
4 Tips to Prevent Employee Embezzlement
Create a Culture of Honesty
From corporates to homes, employee embezzlement is prevalent in all walks of life. You can never expect to maintain complete control over your business matters if you fail to create an honesty culture. Those employers who can leverage high-level control over their employees can expect to create a culture of honesty and privacy. This indicates that employees would feel reluctant to get involved in any misconduct, leading them to face legal proceedings. As an employee, it is your moral duty to report any theft or fraud to higher management instead of supporting any wrongdoing.
Keep Track of Inventory
No matter how much you may trust your inventory manager, employee embezzlement can occur anytime. You must always keep a close check on inventory yourself to be 100% sure that nothing is taking place under your nose. Keeping track of inventory provides you with a clear snapshot of your inventory level, easing your decision-making process. Besides keeping an inventory record of high-value items, you should also keep records of damaged, low-selling, and obsolete merchandise.
Review Bank Accounts and Statements
For better audit trails, you must keep your personal and business accounts separate. Any discrepancies or fraudulent account activity found in bank accounts and statements must be taken care of wisely. Accurate bookkeeping records will lead you to a better position to make important financial decisions. To prevent employee embezzlement, you must keep a regular check-in place for getting the true picture of your business’s finances.
Conduct a Pre-Employment Check
A pre-employment check reveals many possible employees, such as any criminal history in previous jobs and other similar things. You must screen new employees to distinguish the dishonest and prevent employees from stealing from you. With similar efforts, you will help prevent employee embezzlement in your business and help your business grow exponentially.About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity.