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 are able to develop a theft prevention mechanism are able to 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 ever trust them blindly. There must always be proper checks and balances in place for preventing your business from employee embezzlement. In America alone, businesses lose around $60 billion each year to employee theft or fraud, which is the biggest reason behind 33% businesses that 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?
A embezzler is usually an employee perhaps with 4-5 years of experience working with the company or more. The person is usually described as 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 sharing of sensitive information is money.
Potential warning signs of employee misconduct are:1. A change in an employee’s habits and behavior
2. Lack of interest in completing their tasks
3. 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 a culture of honesty. Those employers who are able to leverage a 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 which may lead 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 in order 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 which will ease your decision making process. Besides keeping an inventory record of high-value items, you should also keep a record 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. For the prevention of 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 a lot about 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 not only help prevent employee embezzlement in your business but also help your business grow exponentially.
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