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signs of embezzlement - Complete Controller

Sometimes business owners face employee embezzlement or at least have the fear it may occur. This kind of fraud can be even more devastating if it occurs in the first phases of business development. Employee embezzlement is the most insidious and common of all fraud attacking small businesses. According to a recent study conducted by an association of certified fraud examiner (ACFE), employee embezzlement is costly to companies, and it takes them years and years to recover from the loss. Companies with fewer than 100 employees accounted for 35% of fraud cases.

These findings bear witness to the fact that employee embezzlement can turn a business venture into a misadventure. Why? Because it drains the business’s revenues and profits that help businesses to stay in the competitive race. The literal meaning of embezzlement is taking money, property, or any valuable thing from the person to which it belonged. Companies must recognize and deal with embezzlement, fraud, theft, or any con or deception that may hurt your business and its fate. You must be aware of the warnings and take deliberate steps to prevent fraud within your organization. Check out America's Best Bookkeepers

Root-Cause of Employee Frauds and Threats

Increased trust in your employees, failure to appreciate new and trusted employees, poor management of finances, and lack of bookkeeping and accounting control often lead companies near to a complete shutdown point. As per the study, your trusted business partners or employees would probably steal more from you than the company’s newest employees. Why? Because they are more aware of business conduct and processes than new hires. So, there shouldn’t be anything like blind trust in business. You should always monitor your employees regardless of their experience and terms with you.

Moreover, employees’ underlying motivation is one of the biggest reasons for embezzlement, where they feel underappreciated, underpaid, and overworked. Businesses need to boost their employees’ morale by valuing their performance and potential if they expect to prevent fraudulent activities in their organizations. Trust me! Your employees can change the entire fate of an underperforming business if you appreciate their efforts and give them perks and benefits along with deserving gross salaries. Check out America's Best Bookkeepers

Poor management of finances and admin work can be costly to a business. It can even kick a business out of the competitive race. Employees who intend to steal from you have a sharp mindset that encourages them to devise creative ideas for stealing or theft. Being a business owner, you must prevent them from stealing and embezzlement. For which, you should leave no margin of room for your employee to take from you.

Moreover, it would help if you took management and admin control in your hands. Business books are not that hard to manage and supervise. All that it takes is your motivation to make efforts to prevent your employees from embezzling or stealing from you.

What Could Be the Warning Signs?

The list of warning signs could be limitless depending on nature, size, and business operations. However, there are sure warning signs that let you know if your employees are stealing from you.

  • A change in employee working habits such as disorganized company records
  • The unexpected change in record-keeping methods or systems
  • Unexplained funds to buy luxury items such as expensive cars, watches, or boats
  • An unusual drop in profits Check out America's Best Bookkeepers
  • An employee takes business bills, receipts, and/or bookkeeping home without permission
  • Your accountant is reluctant to hand over books and critical financial records
  • Your accountant spends more time at the company than usual
  • An employee with financial problems and family pressures
  • An employee calls it quits from the company suddenly

Embezzlement and Prompt Prosecution

The signs of embezzlement or employee theft are endless. However, you can minimize these fraudulent activities by spending more time and remaining true to your business. You can save your failing business and keep its positive image in the market if you have processes prohibiting employees from stealing. Perhaps it may account for legal proceedings or heavy penalties under a company’s policy.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers
Embezzlement In Accounting - Complete Controller

It is a bitter reality that an employee hired by you and working with you can steal from you. Taking discounts more than allowed or carrying office supplies home often happens in offices, no doubt. But, if this stealing rises to the level of embezzlement, it is alarming for business owners. Embezzlement in accounting is not suitable for the health of your business.

Many organizations and individual business owners face employee theft and embezzlement each year. Check out America's Best Bookkeepers Embezzlement is theft or immoral actions by employees. According to a 2012 report from the Association of Certified Fraud Examiners (ACFE), “the typical U.S. business loses 7% of its annual revenues to employee fraud,” and small businesses have the most cases and the highest losses.

Embezzlement is unavoidable and happens in small, big, profitable, and non-profit companies. No business owner wants to be the victim of embezzlement. Fraud affects the finances, image, and morale of the company. All factors decline after a fraudulent case. Most organizations adopt shortcuts for fraud prevention. These tactics only decrease the opportunity for fraud. Fraud deterrence is essential for all organizations. The bigger the organization, the more the chances of fraud increases. Frauds are as old as human history and can happen to any company or business despite the organizational structure and the number of workers. Small business managers trust their workers more than usual, and, because of that, there may be weaker internal controls.

Studies show that embezzlement is the product of certain behaviors. In the ACFE’s report, 92% of fraudsters in cases studied exhibit behavioral warning signs before being detected. So, before you instigate a full-scale witch stalk for possible fraudsters, observe and look for the understated behavioral warning signs of embezzlement in your organization.

The following are the signs of embezzlement in accounting: Check out America's Best Bookkeepers

Unexplainable records:

Any unexplained and unjustified changes in bookkeeping records are warning signs for embezzlement in accounting. Suppose there is a decrease in the revenues despite continuous payments from the business bank account. There are various pending payments for long periods without any justified reason. Unexplainable increases in expenses and a decrease in profits means that money is draining out of the company to a place where it is not supposed to go.

The over efficient workaholics:

An accountant who is a fraudster will go to any extent to hide his or her crime. More often than not, they want to work off-hours when everyone has gone home or refused vacations. They may also try to take work home. All of these activities are red alerts and need to be addressed. Keep an eye on such workaholics. In today’s busy and selfish world, some unfortunate individuals exert extra hours with bad intentions.

Unsatisfactory answers: Check out America's Best Bookkeepers

Fraudsters try to hide many documents and processes from managers and others. If any manager or others try to get involved in their work, they become offended. They give unsatisfactory explanations and answers on any fault.

They are overprotective. They work alone and don’t like any involvement or interference. Records maintained by them become inaccessible and untouchable for others. When asked questions, they become overly defensive. They know that their records will unveil their embezzlement, and their answers will be suspicious and unrealistic.

Financial stress:

If any accountant faces any financial stress in their life, they are more likely to plan embezzlement by using accounting records. Any unexpected financial loss like divorce, mortgage, or debt acts as the trigger for embezzlement. Know your employee by taking time for small discussions with them about their current situation. In this way, you can detect any sudden change in their behavior and activities.

Conclusion:

Embezzlement in accounting and bookkeeping can happen to any organization. The signs mentioned above are useful in early detection.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers

Fake business man with clipping path
Many organizations and individuals face employee theft and embezzlement each year. Embezzlement is theft or misappropriation of funds by employees. According to a 2012 report from the Association of Certified Fraud Examiners (ACFE), “the typical U.S. business loses 7% of its annual revenues to employee fraud”. Small businesses have the most cases and the highest losses. Risk of fraud has increased due to the advancement of technology and progressive development of the world into a global village. Organizations should develop multi-layered fraud prevention strategies while keeping these statistics in view.

Warning signs:

  1. The employee is working extra hours.
  2. Petty cash and supplies are decreasing rapidly.
  3. The employee is frequently taking work home.
  4. The employee has an unusually close relationship with vendors.
  5. Employee is obviously spending more than they are earning.

How to Prevent Theft of Physical Assets:

Random and surprise audit system:

Along with annual and quarterly audits of assets, a system for uninformed audits should also be developed. Under pressure of unexpected audits, employees are normally more likely to avoid stealing and fraud.

Segregation of duties:

Duties of the inventory management staff should be clearly delegated to prevent fraud. Purchase order issuance and receiving of stocks should be done by two different individuals.

Security cameras:

In inventory storage areas, CCTV cameras should be installed to prevent employee theft.

Limited access to inventory storage areas:

Only authorized personnel are allowed to enter areas where there is a lot of inventory or financial information.  It should also be kept locked during off hours. Keys should be issued to specified individuals only.

How to  Prevent Check Tampering:

Security of blank checks:

Blank checks are not accessible to anyone and should be locked until required for bookkeeping.

Check bank statement of  business:

Review of monthly bank statements helps in detecting fraud in the form of tampered checks.

How to Prevent Expense Reimbursement Schemes:

Receipts of expenses:

For reimbursing random employee expenses, demand a receipt of those expenses which the employee is claiming.

Policy for expense reimbursement:

A company must have a documented expense reimbursement policy. A clear segregation of reimbursable expenses should be defined in that policy and every employee must receive a copy of reimbursement policy.

Comparison of expense reports:

A comparison of the expense reports submitted by different employees should be made to evaluate the legality of expenses.

How  to Prevent a Billing Scheme:

List of approved vendors:

To prevent fraud at this level, maintain a list of approved vendors and do research to ensure the legality of the vendors. If you don’t practice this simple plan, then you may be paying fake companies.

List of approved price:

The approved price list should also be maintained to avoid payment at higher rates.

Signed receipts.

Sign a check only if a signed receiving of the product is attached.

How to Prevent Theft of Cash:

Manager’s approval:

Sensitive transactions should always be accomplished after approval of a manager.

Monthly account statements:

Regular updates of customer account statements prevent fraud at this level.

Rotation of duties:

Rotation of duties and sending the employee on annual leaves and vacation prevents employee theft because the employee has the terror of easy detection by others.

Bank lockers:

Cash and payment handling by employees should be minimized to prevent cash theft. Payments should be received directly into a bank account of the company.

Surprise audit of cash:

Discrepancies in cash can be detected easily by counting the cash and comparing it with receipts.

Video cameras:

Install video cameras in sensitive areas where cash is handled to prevent stealing.

Conclusion:

Fraud prevention and fraud handling are very essential to secure your business. Following the above shortcuts in an organized manner will lead to an anti-fraud policy that actually works and strong internal controls.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

 

 

 

Criminal counting ransom money for kidnapping, blackmail, contract killing, stock footage
There is certainly no denying the fact that businesses fear embezzlement, fraud, and theft. According to a studies, embezzlement eats up a significant portion of revenue and annual profits. It restricts companies in creating a high-level impact in the market which further prevents them from expanding their business operations. Statistics reveal that trusted employees steal more from businesses than other individuals or stakeholders in the company.

Top executives and business owners from around the globe have devised methods to protect their business’s from fraudulent activities. But, still, no one has yet come up with a magic formula to completely prevent the unfortunate reality. Employee theft and fraud are eminent. Employees’ opportunistic behavior often leads them to commit financial crimes causing companies a great deal of financial stress and trauma. A staggering 87% of embezzlement cases come from trusted partners and employees, which is worth contemplating.

Small Businesses Are More Vulnerable To Fraud

The media is filled with thousands of stories of serious fraud. This indicates that the life of business owners, especially entrepreneurs, is never easy. They have to regularly come up with different ways to protect themselves against embezzlement. Inexperienced business owners often lack the seasoned wisdom to make a distinction between their employees, especially those who are stealing. Those who have a habit of stealing are quite often smart, confident, and less concerned about losing their jobs, as they already know the repercussions.

Those who steal without the fear of getting caught can ruin a business entirely. Small businesses may be more vulnerable to fraud, but that doesn’t mean that nothing can be done to prevent embezzlement. Being a business owner, it is your duty and responsibility to maintain complete control over your finances and other important matters of your business. Developing a framework and streamlining operations requires you to know every fine detail. From bookkeeping accounts and bank statements to inventory and clients, you must know everything prior to making important business decisions. On top of all of this, unfortunately, you must be aware of the possibility of fraudulent activities in your business as well.

Protecting your business against embezzlement may be hard, but it is not impossible. Below, we have outlined how you can maintain complete control over your business and prevent cash, goods, and sensitive information from becoming the next case of embezzlement.

Know Your Employees and Notice Changes in Their Commitment

Sadly, your employees are a potential threat to your business because you never know who will steal from you. It could be a new employee just coming into the company or a trusted veteran. However, with minimal effort, you can prevent a lot of anguish. To protect your business against embezzlement, you must know your employees well. Things such as sudden changes in habit and behavior, a lifestyle above salary-levels, overnight shifts, strong objections to new accounting regulations, discrepancies in financial records, drugs, gambling, etc. may be warning signs of embezzlement.

Keep a Check and Balance System in Place

Obviously, it is hard to manage everything manually. It is more beneficial to create a custom solution tailored to your business needs in order to record, track, and analyze things wisely for better decision making. In layman terms, what’s going in and out of your business must be recorded chronologically in order to have a clear snapshot of finances and other important business matters. Keeping your personal and business accounts separate allows you to track personal and business expenses independently. This way, you will gain a true picture of your business, which will further prevent embezzlement.

Create a System to Report Theft or Fraud

A reporting system system needs to be very carefully incorporated into a business, as it shouldn’t signal employees as a sign that you don’t trust them. Losing the trust of your employees is hard to remedy. Therefore, you must keep all of the complaints filed by your employees confidential and secure from their co-workers. This way, employees feel more encouraged and safe in reporting fraudulent activities that they think might be happening. This will help you protect your business against embezzlement.

Check out America's Best Bookkeepers
About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

Employee Embezzlement - Complete Controller

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 can develop a theft prevention mechanism can save a lot of hassle for their businesses. Check out America's Best Bookkeepers

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 trust them blindly. There must always be proper checks and balances in place to prevent your business from employee embezzlement. In America alone, businesses lose around $60 billion each year to employee theft or fraud, which is why 33% of businesses 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?

An embezzler is usually an employee perhaps with 4-5 years of experience working with the company or more. The person is usually described as an 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 the 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 Check out America's Best Bookkeepers

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 an honesty culture. Those employers who can leverage 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, leading 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 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, easing your decision-making process. Besides keeping an inventory record of high-value items, you should also keep records of damaged, low-selling, and obsolete merchandise. Check out America's Best Bookkeepers

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. To prevent 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 many 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 help prevent employee embezzlement in your business and help your business grow exponentially.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers
Stop Embezzlement - Complete Controller

Embezzlement is the theft or misappropriation of funds placed in one’s custody. In other words, it is stealing something from an organization that is not yours. Regardless of the scale or magnitude of a business, embezzlement of funds exists in almost every organization. Therefore, you must come up with a prevention plan before it drains your small business. Check out America's Best Bookkeepers

Employee fraud and embezzlement can occur in any organization. Small businesses often lack experience and knowledge, which prevents them from having the right checks and balances in place. According to studies, businesses lose approximately 8% of their annual revenues from theft and embezzlement, making it the biggest reason why most start-ups fail to create an impact. Employees can make or break a business. They have the potential to take a business to the top or break it apart to pieces. Employees can determine the fate of a company, and it’s long-term survival.

Employee embezzlement can drain your small business, perhaps making you lose everything within a short period. The portion of assets that an employee steals each month accumulates to a huge amount, which eventually leads a business towards its gradual demise. Stealing from an employer raises serious moral and ethical concerns; it’s not a legal activity under any circumstance. Moreover, it may lead one to face serious repercussions such as lawsuits and jail time.

Embezzlers can often get away with their actions because they are smart and steal at a suitable time of their choosing. They know their organization’s processes and have a clear picture of how to steal without getting caught. However, with increased technology and advanced accounting software, now you have options to prevent maximum leakage or data theft in your company. Below are our suggestions on how to stop embezzlement before it drains your small business. Check out America's Best Bookkeepers

Look For Financial Discrepancies

An unusual fall in profits or a squeezing profitability index are symptoms of embezzlement. By keeping a highly advanced system in place, you can prevent embezzlement or data leakages. In doing this, you will get to know your profit shortfalls and even catch culprits for further disciplinary actions.

Regularly Check Company Records

No matter how much you trust your accountant, you should always regularly check your company’s financial records to obtain a clear picture of the finances. Any discrepancies found in the records should be taken care of wisely. Financial books and bookkeeping records reveal the true status of a company’s finances.

Respond to Client Complaints

This is one of the major ways to find out if embezzlement is occurring in your organization. Clients often complain when their order is not dispatched properly or doesn’t justify their expectations. Therefore, if you start to receive many complaints, it is wise to look into the matter. It may show you if something suspicious is happening. Check out America's Best Bookkeepers

Notice Employee Habits and Behavior

Pay attention to any significant changes in the habits and behaviors of your employees. To stop embezzlement before it drains your business, you need to develop a mechanism that may discourage employees from participating in such malicious and unethical deeds.

Leverage Control over Financial Decisions

In the core of every successful business lies well-established and ethical teamwork. You can’t expect to excel all alone. You need to empower your team to help with the prevention of fraudulent activities. Although most organizations are affected by this disease, you need to develop suitable preventive measures to stop and save your organization from embezzlement.

Leverage control over your organization’s finances to establish your leadership over all aspects of your business, especially related to financial decision-making. Stopping embezzlement in its tracks is extremely important for winning the competitive business race.

 

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers
Employee Theft and Embezzlement - Complete Controller

Employee theft and embezzlement are the main reasons behind the demise of most start-ups. Entrepreneurial business ventures are mostly initiated by inexperienced individuals who lack business management knowledge, skills, and expertise. However, business management doesn’t have to be that difficult to master. All you need to do is learn the art of the game and know your employees well enough to create a powerful prevention plan against employee theft and embezzlement.

Unusual habits and changing behavior of employees plus a lack of timeliness in updating and reconciling accounting records reveal a lot about an employee and their commitment to their work. Detecting and preventing employee theft and embezzlement has become the need of the hour. Companies are even ready to hire professionals who devise creative ways to catch the culprits for their misconduct. According to studies, business owners worldwide lose about 6% of their annual revenues and profits to employee embezzlement. Check out America's Best Bookkeepers

Blind Trust Has Its Repercussions

You might be surprised to know that trusted and established employees steal more from companies. How can a business expect to witness significant returns if their trusted partners, stakeholders, or employees will steal from their business? This is alarming for your company’s fate because if you are not going to stop it, it will slowly and gradually eat your business completely. In other words, unfortunately, employee theft and embezzlement is something that you will constantly battle throughout running your business. There is certainly no magic formula that will stop it right away, but your constant efforts will surely positively impact you!

We, as humans, tend to fall prey to our desires. We look for an easy way to fulfill our wants and needs, which often leads us to commit fraudulent activities like stealing supplies from homes and offices. This activity has to be stopped no matter what because it will ruin our motivation to earn legitimate money, which is hard to gain back! Check out America's Best Bookkeepers

What to Do To Prevent Employee Theft and Embezzlement

According to studies, 55% of fraudulent activities result from a group activity, which means involving others to help commit financial crimes. This information bears testimony that employee theft and embezzlement are tough for an individual and a lot easier for those who work in groups for mutual gains, financial or personal. Certain things can help you protect your business against embezzlement, if executed perfectly, such as knowing and supervising your employees, maintaining control over financial matters, cross-checking or auditing business bookkeeping, integrating and incorporating computer software for digital tracking, separating financial duties of employees and last, but not least, checking stock inventory regularly.

Forms of Employee Theft and Embezzlement

People who most steal from you are clever and smart individuals who will always think one step ahead of you, which means you need to constantly upgrade and change your measuring mechanism for evaluating your employees’ misconduct as they know your company inside and out. Employee theft and embezzlement normally exist in three forms; theft of cash, theft of goods, and sensitive information theft. Check out America's Best Bookkeepers

What To Do For Getting Things Back On The Track

You need to discourage these fraudulent activities as much as you can because it will help you save a lot of money in the long run. Instead of your company policy, you may document every sale/purchase for your records, create and follow up on written procedures for ideal business management, keep track of inventory at your capacity and periodically review employee theft and embezzlement prevention measures.  According to experts, if each employee is held responsible for his/her deeds, there are fewer chances of theft, fraud, shoplifting, embezzlement, and other fraudulent activity incidents.

Suppose all preventive measures fail to get things back on track. In that case, you should consider hiring a professional accounting, bookkeeping, or auditing expert who will sketch a clear picture of your finances for further coming up with a prevention plan to stop employee theft and embezzlement.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers
Employee Theft - Complete Controller

Small business owners are hesitant to report an employee stealing from their company as they do not want to involve the police, new research finds.

Employee theft may not be the number one concern that keeps a business owner awake at night, but it can negatively impact a company. Besides hurting employees’ morale and damaging a brand name and reputation, it can drain a significant portion of annual revenues and profits that eventually kicks a business out of the competitive race. Companies cannot expect to survive for long in the wake of challenges and the ever-evolving mindset of stealing. Companies need to develop loss prevention strategies and implement the proper tools and techniques to prevent employee theft and embezzlement. Check out America's Best Bookkeepers

Statistics Reveal a Different Picture

According to the study conducted and reports filed by the University of Cincinnati, research shows that 64% of employees steal from small businesses. In comparison, only 16% of employers report the theft to the police. There is certainly no denying the fact that cheating employees are ever-ready to steal from a company whenever they get the opportunity. Small businesses are more susceptible and vulnerable to employee theft and embezzlement.

One report finds that companies with fewer than 100 employees have a higher percentage of theft and embezzlement cases. A staggering 92% of theft cases bear testimony to the fact that employees feel more inclined to steal from small companies due to their freedom to handle essential business affairs like business management, bookkeeping, or accounting on their own. The University of Cincinnati’s research also found out why employers are reluctant to get the authorities involved. You may be surprised to know the reasons that include concerns about the criminal justice system and emotional ties. Check out America's Best Bookkeepers

What Makes Small Business Owners Hesitant to Report Theft?

There are reportedly four reasons employers feel reluctant to report employee theft to the police, and we will discuss those below.

No Real Victims

Business owners’ nature and approach play a significant role in determining an employee’s fate stealing from a company. Some owners are more concerned about recovering their losses than actually reporting the fraudulent activity. This category of people may even forgive their employees and give them another chance to prove their worth and loyalty or, in extreme cases, set a precedent and fire them after recovering their losses without reporting them to the authorities. Many business owners do not see victimization as a serious offense to be prosecuted officially and causing troubles beyond firing the employee stealing from the company. They believe that are many more things to worry about rather than this.

Attorney Advises Against It

The costs of prosecuting a perpetrator may be much more than what an employee stole from your company. Small businesses usually have scarce resources to deal with employee theft that restrict them from prosecuting a court case. However, for large businesses and corporate level frauds, $20,000 or more, prosecuting a case is advisable.  Still, the slow restitution could take ages when you recoup the stolen funds. Therefore, many attorneys advise against reporting employee theft to law enforcement, significantly if the successful prosecution outweighs any likely benefits that the employer intends to attain for their time and efforts. Check out America's Best Bookkeepers

Emotional Ties

Since trusted and seasoned employees often have a long work history and good reputation, they tend to steal more from a company than those who just joined the workforce. Because of this, business owners often forgive the convicted employee based on emotional ties and history. This is probably one of the most significant precincts faced by small business owners that prevents them from reporting a crime to the local authorities.

They See the Criminal Justice System as Ineffective

Small business owners are often reluctant to get involved with the police in complicated issues involving employee theft. The police will investigate the matter and may look for evidence of theft, which may include interaction with coworkers that will create a negative vibe in the organization. On the other hand, some business owners consider criminal justice proceedings as ineffective or incompetent. Quite often, there have been reported cases of law enforcement personnel caught in taking bribes from perpetrators, which poses a question on the justice system’s credibility. So, small business owners bear themselves from the trial rather than getting involved in lengthy and complicated prosecution methods.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers

Concept photo for hidden money showing a businessman pulling back his shirt exposing twenty dollar bills
It is a bitter reality that an employee hired by you and working with you can steal from you. Taking discounts more than allowed or taking office supplies home happens often in offices, no doubt. But, if this stealing rises to the level of embezzlement, it is alarming for business owners. Embezzlement in accounting is not good for the health of your business. 

Many organizations and individual business owners face employee theft and embezzlement each year. Embezzlement is theft or bad actions by employees. According to a 2012 report from the Association of Certified Fraud Examiners (ACFE), “the typical U.S. business loses 7% of its annual revenues to employee fraud” and small businesses have the most cases and the highest losses.

Embezzlement is unavoidable and happens in small, big, profitable and non-profit companies. No business owner wants to be the victim of embezzlement. Fraud affects the finances, image, and morale of the company. All factors decline after a fraudulent case. Most organizations adopt shortcuts for fraud prevention. These tactics only decrease the opportunity for fraud. Fraud deterrence is essential for all organizations. The bigger the organization, the more the chances of fraud increases. Frauds are as old as human history and can happen to any company or business despite the organizational structure and the number of workers. Small business managers trust their workers more than usual and, because of that, there may be weaker internal controls.

Studies show that embezzlement is the product of certain behaviors. In the ACFE’s report, 92 percent of fraudsters in cases studied exhibit behavioral warning signs before being detected. So, before you instigate a full-scale witch stalk for possible fraudsters, observe and look for the understated behavioral warning signs of embezzlement in your organization.

Following are the signs of embezzlement in accounting:

Unexplainable records:

Any unexplained and unjustified changes in bookkeeping records are warning signs for embezzlement in accounting. If there is a decrease in the revenues despite continuous payments from the business bank account, there are various pending payments for long periods of time without any justified reason, or if there are many unexplainable increases in expenses and a decrease in profits, it means that money is draining out of the company to a place where it is not supposed to go.

The over efficient workaholics:

An accountant who is fraudster will go to any extent for hiding his or her crime. More often than not, they want to work off hours when everyone has gone home. They refuse to go on leave or avail gazetted holidays. They may try to take work home. All of these activities are red alerts and need to be addressed. Keep an eye on such workaholics. In today’s busy and selfish world, some unfortunate individuals exert extra hours with bad intentions.

Unsatisfactory answers:

Fraudsters try to hide many documents and processes from managers and others. If any manager or others try to get involved in their work, they become offended. Unsatisfactory explanations and answers are given by them on any fault.

They are overprotective. They work alone and don’t like any involvement or interference. Records maintained by them become inaccessible and untouchable for others. When asked questions, they become overly defensive. In fact, they know that their records will unveil their embezzlement and their answers will be suspicious and unrealistic.

Financial stress:

If any accountant is facing any kind of financial stress in their life, they are more likely to plan embezzlement by using accounting records. Any unexpected financial loss like divorce, mortgage or debt act as the trigger for embezzlement. Know your employee by taking time for small discussion with them about their current situation. In this way, you can detect any kind of sudden change in their behavior and activities.

Conclusion:

Embezzlement in accounting and bookkeeping can happen to any organization. The above mentioned signs are useful in early detection.

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About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual accounting, providing services to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks file and critical financial documents in an efficient and secure environment. Complete Controller’s team of  US based accounting professionals are certified QuickBooksTMProAdvisor’s providing bookkeeping and controller services including training, full or partial-service bookkeeping, cash-flow management, budgeting and forecasting, vendor and receivables management, process and controls advisement, and customized reporting. Offering flat rate pricing, Complete Controller is the most cost effective expert accounting solution for business, family office, trusts, and households of any size or complexity.

 

fox in the hen house - Complete Controller

Embezzlement is a type of financial theft. Embezzlement is a term usually used for fraud or theft made by a trusted employee in a business. Embezzlement is generally a continuous act of stealing small amounts from the company’s finances to fund personal expenses.

In the case of embezzlement, the employer can bring a legal case to court against the employee. The penalties depend upon the amount of theft. After a court case, if found guilty, the embezzler may be required to pay back the money or maybe fined. Some of the cases may cause a prison sentence. Accounting embezzlement is the manipulation of bookkeeping records to hide the theft of assets. Assets can be both funds or property. A bookkeeper who takes customer’s refunds and keeps them as their own is an example of embezzlement. Embezzlement impacts the finances of your business in the long run. Check out America's Best Bookkeepers

A fox in a financial hen house is, metaphorically speaking, for those trusted to manage bookkeeping work who ultimately misuse their position. They manipulate figures in accounting to make frequent thefts.

Focus on two factors to prevent embezzlement in your business bookkeeping.

 

The Signs of Embezzelment

The difference in Accounting Statements

If you have an electronic system or your accounting statements are done manually on a register, the financial statements should match the cash flow statements and balance sheet. There is a chance of honest error in manual bookkeeping, but keep an eye on any difference in the numbers on your accounting statements.

The Employee is Spending More than Others

If one of your employees starts spending more than others, keep a close look at their activities in your business functions. They might be involved in some fraudulent practices. A fixed pay usually does not leave room for spending extra than actual needs. Check out America's Best Bookkeepers

Excessive Transactions

If there are numerous transactions to clear errors, it might be done to hide fraud or theft. If there is more than one payment for a single bill, it again might be the case of fraud. Keep a very watchful eye on the bookkeeping in your business.

Refusal to Leave Bookkeeping Tasks to Others

If an employee is working hard in a company and is not leaving work for others, a check on their activities must be kept. They might be involved in fraudulent practices.

Unusual Working Hours

If an employee has a routine of unusual working hours, they might be involved in some fraud in your business bookkeeping. Specifically, if they are frequently coming in early, leaving late, and doing overtime without a demand for extra payment, these are signs of suspicious interest in your business.

Motives of Embezzlement

There are various motives to commit embezzlement for an employee.

Revenge Motives

When interviewed, most embezzlers said the reason behind embezzlement was to take revenge for the mistreatment they had received at the company. Check out America's Best Bookkeepers

For example, if an employee had worked very hard to get a raise but was denied, they can develop ill feelings towards the owner and the company. Unfortunately, this is a common practice of employers to make their employees work longer hours without many benefits. Working long hours often results in an increased profit margin, but the employees are often not given incentives. This is the most common cause of embezzlement. The employees try to get the business back, or they want to hit the employer where it hurts the most. Of course, financial loss, though small, hurts the employer and their company.

Lifestyle Motives

There are reported cases where an employee makes frequent thefts from a company’s funding to support a lavish lifestyle.

Addiction Motives

Addiction is the root cause of so many physical ailments as well as unethical practices. Those employees who are passing through emotional stress or trauma must be given emotional support. A few fall victim to drugs. A paycheck is not enough to support their addiction, and, often, they find the only way out is to steal from their employer.

Conclusion

To prevent embezzlement, you must focus on cash transactions and the person in the fiduciary position. Also, be aware of the warning signs of theft in your company. You must be mindful of unusual practices going on in your office. Besides these precautions, build a good relationship with your employees. This will ensure trust between you and those that work for you.

Check out America's Best Bookkeepers About Complete Controller® – America’s Bookkeeping Experts Complete Controller is the Nation’s Leader in virtual bookkeeping, providing service to businesses and households alike. Utilizing Complete Controller’s technology, clients gain access to a cloud-hosted desktop where their entire team and tax accountant may access the QuickBooks™️ file, critical financial documents, and back-office tools in an efficient and secure environment. Complete Controller’s team of certified US-based accounting professionals provide bookkeeping, record storage, performance reporting, and controller services including training, cash-flow management, budgeting and forecasting, process and controls advisement, and bill-pay. With flat-rate service plans, Complete Controller is the most cost-effective expert accounting solution for business, family-office, trusts, and households of any size or complexity. Check out America's Best Bookkeepers