Every business can be hurt by employee theft. When a staff member steals from you, they're literally walking off with your assets and quite possibly a substantial percentage of your profits.

To be fair, many — perhaps most — employees are honest. But some will steal from their employers if they think they can get away with it. Others may see executives or colleagues cutting corners or taking liberties with the rules and feel they're entitled to steal. Still others may be driven to desperation by personal financial problems.

How Bad is the Problem?

Here are a few instructive facts about internal theft:

  • The Association of Certified Fraud Examiners' Occupational Fraud: A Report to the Nations is among the best sources for fraud data. For instance, its 2022 report found that a typical fraud case lasts 12 months before detection and results in a median loss of $117,000. These are truly frightening numbers that should give every business owner pause.

  • It's important to remember that "theft" doesn't only mean swiping office supplies or plucking a wad of bills from petty cash. It also involves fraudulent acts such as forging or altering checks.

  • Some of the most damaging forms of theft involve stealing intellectual property, such as software code or confidential documents that could be valuable to your competition.
  • What can you do to protect your business? The following four steps can help a great deal:

    1. Establish a culture of ethical behavior. Communicate company values to employees. Publish a code of ethics and encourage staff members to work and act in ways that demonstrate fairness, honesty and integrity. Let everyone know what constitutes theft and what the consequences will be if they're caught.

    2. Review and, if necessary, strengthen internal controls. You must have policies and procedures in place to prevent theft. One simple step is to segregate duties for certain positions. For example, if one employee is allowed to open mail, post cash inflows to the books and make bank deposits, your business is in danger. A better approach would be to assign one employee to open the mail and note money coming in, a second to enter receipts in the books (double-checking the first employee's work) and a third to deposit money in the bank. And these duties should be rotated so no one gets too comfortable.

    3. Watch for suspicious behavior. Here's one perhaps surprising clue: a worker who never takes a day off. Such individuals might be involved in illegal activity because they're afraid they'll be discovered if someone fills in for them. Also be wary if an employee has an unusually close relationship with a vendor rep. This could make it easy for the two to collude and cover up fraudulent transactions.

    4. Bond employees who handle inventory or money. This puts insurance in place to help cover potential losses.

    Take action today. Make sure that — at your workplace — crime doesn't pay. Be sure that applies to everyone, even high-level managers. And no matter what system you have in place, don't underestimate the possibility that your employees are more creative and devious than you think. Your CPA can be an invaluable partner in determining the efficacy of existing internal controls and developing new or better ones to protect your business.


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