According to Statistic Brain Research Institute, employee theft accounts for $50,000,000 each year, and is the cause of a staggering 1/3 of all business bankruptcies. And, the Association of Certified Fraud Examiners estimates that an average of 6% of revenues are lost to employee theft in a typical business. Let those numbers sink in for a moment. One out of three commercial bankruptcies are due to employee theft or fraud. Six cents of every dollar earned will be stolen. This is a huge threat to every small business. Even if it doesn’t cause bankruptcy, it can seriously reduce profitability – and it is criminal and just plain wrong. Here are five steps you can take to reduce your exposure and prevent employee theft.
Implement a Strong System of Internal Controls
It is important to have strong internal controls in place. For example, the person who is responsible for recording a transaction should not also be the person initiating and performing that transaction.
Where physical inventory, equipment, or cash is kept, install access control systems to allow only authorized personnel to enter and keep records of each time they do. Combination and key card locks are good, but the combinations can be shared and the key cards stolen. For the best security, some kind of biometric lock that uses fingerprints, facial recognition, or retina scanning may be the safest choices.
Because each company has unique security needs, it’s important to get professional help for this. I hired a locksmith near me to help me decide the best access control system for my situation, balancing security and cost factors, and it was extremely helpful.
Security cameras and alarmed doors are also important pieces of equipment that can help deter criminal activity or catch the perpetrators, if necessary.
Carefully Screen Potential Hires
Before you hire new employees, implement a system to thoroughly vet them. This should include background checks that search for both criminal histories and civil lawsuits related to collection efforts or fraud. It is also important to verify all past employment and education stated on a resume. If an employee is dishonest on a resume, it is possible they will be dishonest at work, too.
Treat Employees Well
Once you have hired the right people, treat them well. Employees are less likely to steal from an employer they feel cares about them and treats them fairly. Creating a positive work environment pays other dividends, as well, as overall long-term productivity is generally higher in places where employees feel valued.
Allow Anonymous Reporting
Elicit the help of your employees, vendors, and customers in bringing possible theft or fraud to your attention. Create a system through which people can report suspected theft or fraud to your attention anonymously. Anonymity is important because people will be more willing to report what they see if no one in the company will know who is doing the reporting. Once an incident is reported, follow through by looking into each one. Many may turn out to be nothing but investigating every report will ensure that you catch those reports that are true.
Implement a System of Random Audits
Every business should be doing regularly scheduled financial and fraud audits. Doing random surprise audits can help you assess how well your other measures are working and help uncover weaknesses in your security. Plus, it lets your employees know that you take the threat of theft and fraud seriously, and therefore act as a deterrent.