What Should I Know About Employee Theft?
According to the U.S. Department of Commerce, employee theft costs American business in excess of $50 billion US Dollars (USD) annually. Seventy-five percent of all employees steal from their employers at least once throughout their careers, with half of them doing it more than once. Usually, the employees that are caught stealing aren't the ones you would have expected. There are several things you can do to lessen the likelihood that your employees steal from you, though nothing is foolproof.
The most important step a business owner or manager can do to prevent theft is to select the right employee. Perform a background check before hiring employees to verify that they don't have a history of stealing. Verify their past employment and ask if the employees are eligible to be rehired. Pay attention to the tone of the previous employer's voice when talking about the potential employees, as they are only allowed to verify dates of employment. It is also a good idea to have the candidate take a drug test, as supporting a drug habit is the number one cause of employee theft.
Inform employees of the procedures that are in place to prevent employee theft. This means telling the employees about the over/short cash log, the cameras that point to the cash registers and stock room, the company fraud prevention team and any other internal measures that are taken to prevent theft. Employees who know they may be caught are less likely to attempt to steal from the company.
Employee theft can occur in any company, despite measures taken to prevent it. The only control an employer has over theft is to lessen the likelihood of it occurring and therefore decreasing the amount of revenue lost. To cover the revenue lost to theft, an employer can purchase fraud insurance, also called fidelity bonds. This insurance covers the employer's loss due to fraud that was committed for personal benefit. More information about this insurance program is available on The Association of Certified Fraud Examiners website.
Team members who commit employee theft are usually caught due to monitoring systems. Computer systems that keep records of emails, instant messages, and log-in information and track keywords are the most efficient. An attempt to access company information from an employee's home may signal fraud or an attempt to make changes to company records. A keyword search may reveal an attempt to share company information with an outsider. For retail businesses, cameras are still the best method for preventing and catching employee theft.
I remember working for a certain fast food restaurant that deliberately designed their front counter uniforms with no pockets. I had one pocket for my wallet, but I was a cook and didn't handle money. The general manager told me it was a way to cut down on employee theft. If an employee had no place to store stolen money, then he or she was less likely to skim off the till.
I could see the wisdom in that decision, but I also felt sorry for the employees who had to find other ways to store their personal items, like car keys and identification. If a drawer ever came up short in the cash count, that cashier would be taken to a private office and searched. Most of the time, the problem was just an accounting error, but management would still start an employee theft investigation over a three dollar discrepancy.
People mostly think of employee theft as stealing money, but it can also be services, goods or even time. If an employee fills out his or her own time cards, then there is always a temptation to leave a little early and "fudge" on the time.
I order the office supplies for my department. They are kept in a small closet so employees can go anytime to get what they need: pens, pads, etc. I went into the office once and every legal pad, every pen, every steno pad was gone. I had restocked just a couple of days before. I mentioned it to a co-worker, who reminded me an employee had left the company about that time. I can't prove anything, but my suspicion is that employee made of with about $50 in office supplies. We're a small, family owned company and we can't afford losses like that.
I'd also say independent auditing helps prevent employee theft in departments that handle money, but are not retail oriented, e.g., the accounting department for a company. An independent audit can help spot issues with money shortfalls quickly, and with no taint of partiality.
Several years ago, a woman was convicted of theft after she had stolen over $150,000 from her employer. She didn't do it all at once. It was just a few hundred dollars here and there, over a long period of time. She had some financial problems at home, had sole control and custody of the money -- and no one had called for an audit in years. It was classic: motive, means and opportunity.
Having frequent, independent audits can put a stop to a lot of this.
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