Employee Theft: Why Most Small Businesses Don’t Report It

Employee Theft - Complete Controller

Small business owners are hesitant to report an employee stealing from their company as they do not want to involve the police, new research finds.

Employee theft may not be the number one concern that keeps a business owner awake at night, but it can negatively impact a company. Besides hurting employees’ morale and damaging a brand name and reputation, it can drain a significant portion of annual revenues and profits that eventually kicks a business out of the competitive race. Companies cannot expect to survive for long in the wake of challenges and the ever-evolving mindset of stealing. Companies need to develop loss prevention strategies and implement the proper tools and techniques to prevent employee theft and embezzlement. Check out America's Best Bookkeepers

Statistics Reveal a Different Picture

According to the study conducted and reports filed by the University of Cincinnati, research shows that 64% of employees steal from small businesses. In comparison, only 16% of employers report the theft to the police. There is certainly no denying the fact that cheating employees are ever-ready to steal from a company whenever they get the opportunity. Small businesses are more susceptible and vulnerable to employee theft and embezzlement.

One report finds that companies with fewer than 100 employees have a higher percentage of theft and embezzlement cases. A staggering 92% of theft cases bear testimony to the fact that employees feel more inclined to steal from small companies due to their freedom to handle essential business affairs like business management, bookkeeping, or accounting on their own. The University of Cincinnati’s research also found out why employers are reluctant to get the authorities involved. You may be surprised to know the reasons that include concerns about the criminal justice system and emotional ties. Check out America's Best Bookkeepers

What Makes Small Business Owners Hesitant to Report Theft?

There are reportedly four reasons employers feel reluctant to report employee theft to the police, and we will discuss those below.

No Real Victims

Business owners’ nature and approach play a significant role in determining an employee’s fate stealing from a company. Some owners are more concerned about recovering their losses than actually reporting the fraudulent activity. This category of people may even forgive their employees and give them another chance to prove their worth and loyalty or, in extreme cases, set a precedent and fire them after recovering their losses without reporting them to the authorities. Many business owners do not see victimization as a serious offense to be prosecuted officially and causing troubles beyond firing the employee stealing from the company. They believe that are many more things to worry about rather than this.

Attorney Advises Against It

The costs of prosecuting a perpetrator may be much more than what an employee stole from your company. Small businesses usually have scarce resources to deal with employee theft that restrict them from prosecuting a court case. However, for large businesses and corporate level frauds, $20,000 or more, prosecuting a case is advisable.  Still, the slow restitution could take ages when you recoup the stolen funds. Therefore, many attorneys advise against reporting employee theft to law enforcement, significantly if the successful prosecution outweighs any likely benefits that the employer intends to attain for their time and efforts. Check out America's Best Bookkeepers

Emotional Ties

Since trusted and seasoned employees often have a long work history and good reputation, they tend to steal more from a company than those who just joined the workforce. Because of this, business owners often forgive the convicted employee based on emotional ties and history. This is probably one of the most significant precincts faced by small business owners that prevents them from reporting a crime to the local authorities.

They See the Criminal Justice System as Ineffective

Small business owners are often reluctant to get involved with the police in complicated issues involving employee theft. The police will investigate the matter and may look for evidence of theft, which may include interaction with coworkers that will create a negative vibe in the organization. On the other hand, some business owners consider criminal justice proceedings as ineffective or incompetent. Quite often, there have been reported cases of law enforcement personnel caught in taking bribes from perpetrators, which poses a question on the justice system’s credibility. So, small business owners bear themselves from the trial rather than getting involved in lengthy and complicated prosecution methods.

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