Generally, people are good, and employees are honest in their workplaces. However, there have been many occurrences of some employees trying to steal products or money from their employers. The estimated losses attributed to employee theft amount to $200 Billion annually. Business owners should remain alert regarding the loopholes their business operations might have that would allow their employees to steal.
Data from bookkeeping may help you detect this, but only after you have become a victim of employee theft. It would help if you had proactive solutions to prevent theft from happening in the first place. Here is a list of common practices you need to remember when safeguarding your business from the threat of employee theft. Implementing solutions into your strategy would significantly reduce the chances of your business facing employee theft.
Phony Vendor Accounts Set Up By Employees
One of the most common ways for employees to steal is by setting up phony accounts to create fake invoices. By doing this, they can issue checks against these invoices to the vendor account. They are then able to have these checks deposited into bank accounts. This mainly involves misreporting expenses, such that $700 paid to a vendor may be entered into expenses as $800 (with a phony invoice as proof), enabling the employees to write themselves a check worth $100. Another similar issue is setting up a fake payroll for employees who have either quit or are retired.
The solution to this involves tracking purchases in a numerical order. Also, you can assign different employees different tasks. It would be best to have one employee set up a vendor account, a different employee write checks, and another verify and record invoices. In addition, you need to ensure that all employees know the processes in your accounting and bookkeeping systems.
Theft of Checks
It is common for employees to take a check from the company checkbook and then either deposit or cash it. This is because banks do not usually verify the signature on company accounts.
This problem can be solved by keeping your checks locked and issuing them in a particular sequence. Ensure the reconciliation of cash accounts with bank statements every month. It is advised that you review bank statements to ensure that only the authorized checks are cleared.
Stealing Directly from the Cash Register
This is mostly done when a cash payment is accepted by an employee at the cash register, who can balance the drawer later by voiding the particular transaction.
Solving this problem involves, first, keeping a check on the number of voids for each cash register on a routine basis. Along with this, you can have video cameras watch over the registers to ensure that employees do not put any cash from the register into their pockets.
Faking Expense Accounts
Another common way employees steal from their employers is by submitting fake expenses or recording real expenses on a receipt multiple times.
The solution to this consists of adequately recording a receipt of each expense and coming up with a way to ensure that any particular receipt hasn’t been submitted in the past. You can do this by requiring employees to submit unique identifiers for each expense receipt.
For example, a receipt from a vendor could have a unique order number mentioned on the invoice. While a receipt from, suppose, an electrician or plumber for a business-related repair might have a unique invoice number. This will make it easier for you to catch a double entry and verify the authenticity of single entries.
Employees Punching In and Out for Coworkers
This is known as “Time Theft“ and is a common practice committed by business employees who utilize traditional time cards to keep track of working hours. Sometimes, employees fill out time cards for the days they aren’t present if the time cards are not checked daily.
One way to solve such a problem is to adopt a biometric punch-in/punch-out system. Utilizing fingerprint or face detection to keep track of time can help. Many businesses have already incorporated such systems into their operations.
Stealing from Inventory and Falsifying Inventory Records
Sometimes, employees may take items from the inventory that have not yet been entered into your inventory management system. Another thing that happens is the setting up of a phony vendor who does get paid for products that aren’t delivered to the business.
To solve this problem, you need to integrate physical inventory checks into your routine. While doing so, note anything that is missing and utilize RFID tags to track valuable items in the inventory.
Data Theft
This particular kind of employee theft usually targets records of a customer’s data. Other data that might be considered valuable can also be stolen.
Prevent this by requiring employees to frequently change their passwords. Delete the accounts of employees who have stopped working for you either due to retirement, quitting, or being dismissed. You should also restrict access, only allowing employees to access the data relevant to their job function. Cloud storage solutions can provide such security measures for your business’s data.
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