Sticky fingers – and I'm not talking about BBQ
When times are tight – people’s hands can get a little sticky. I came across an article regarding retail businesses in Iowa City and, surprisingly, they have had a 52 percent increase in theft over last year.
Could your business sustain such a loss in a year? Or what if the loss occurred over time and it amounted to thousands of dollars?
Now, this article talks mainly about shoplifting and perhaps your business is not retail, but there are other forms of theft that can have a detrimental effect on businesses. In the past, I have talked about data theft and identity theft, however, this article reminded me of a couple of situations dealing with employee theft:
There was this restaurant that I was familiar with that had five locations. Their bookkeeper was a trusted employee and had worked for this company for many years. Her primary duty was to collect the daily receipts, reconcile them and make the deposit. Everything was tracked and double checked by a staff accountant.
So it appeared that they had an excellent checks and balance program. However, this individual found a loophole and it was later discovered that she had embezzled close to $100,000 from this company over the course of five years. A little bit here and a little bit there – ends up to being a lot when it gets counted!
There was another incident with a computer store. One of their employees – actually it was a manager – was skimming equipment from his employer and reselling it.
As I think about this more, I can recall countless situations where I have heard about companies that had inventory missing, locks left open, misuse of credit cards and product shipments not arriving at their destinations. I am also confident that many of you can remember reading stories just like these – does anyone remember the CIETEC scandal? It is truly amazing how creative a thief can be.
Desperate people will do desperate things.
Regardless of your industry, employee theft and dishonesty should be a concern to every business owner and good controls in place can reduce your exposure. Good tips to follow are:
- Have an internal audit system in place
- Perform criminal background checks on your employees before you hire them – especially if they are going to be handling money.
- Use someone other than the person who makes the deposits to balance the checking account.
- Have procedures in place for your computer operations.
- Use an independent accountant to perform your audits.
While it is virtually impossible to eliminate all of your risk, you can have procedures in place to reduce your risk. You can also make sure that your insurance policy has coverage for employee dishonesty.
Now, keep in mind this coverage does not normally apply to business owners and/or partners and it does have limitations. However, it can certainly protect an employer from financial loss due to fraudulent activities of an employee. So to make sure your business stays out of the headlines, review this coverage with your agent to protect your business today.