5 ways to prevent embezzlement
Whether you’re running a small or large company, employee theft is one of the most prevalent types of theft in the country. In fact, according to a recent embezzlement study, 55 percent of employee theft happens to businesses with less than 500 employees with small and medium-sized businesses the most at risk.
It’s important to understand the profile of a criminal to protect your business. By taking precautions and measures to enhance your security, you may be able to prevent millions of dollars in theft and loss for your company.
Thoroughly vet your candidates
When hiring new employees, it’s essential to go through a thorough reference check to really understand whom you’re putting in place at your business. Simply asking for references isn’t enough. Be sure your human resources manager or hiring managers follow through with checking them. Have the same questions in place for hiring managers to ask references, including questions like “would this candidate be eligible for rehire?”
Although it can be expensive for small companies, it’s also a worthwhile practice to perform background checks before making a final hiring decision. This is especially true for candidates who will be in finance, accounting or any type of money handling position.
Unfortunately, even if you’re a small business owner and have close relationships with your employees, you are still at risk for embezzlement. It is common among embezzlers to suffer from addiction problems often leading to secretly “borrowing” or stealing money from the company with the intention of paying it back.
Create a system of check and balances
When you’re running a business, you’re not always in a position to have multiple employees responsible for accounting, finance, or human resources. However, putting financial responsibilities in the hands of one sole employee could set you up to be robbed. Create a team structure with a separation of duties when it comes to money coming in and out for business purposes.
According to the report, most people who embezzle from a company tend to work alone. By creating a team that is able to hold each other accountable, there’s less opportunity for blatant theft.
Run a credit check on employees in a finance position
Pre-hire procedures like background checks and credit checks can be expensive for small business owners and can often be viewed as unnecessary. However, if you are hiring someone to manage the finances of your business, it’s important to know that they are reliable and accountable.
Embezzlers are often motivated to steal money to fund an extravagant lifestyle. As part of their character profile, thieves who operate like this might have a criminal record already, but still continue to get hired because they are charming and possibly manipulative. If you notice an employee who is living far beyond their means and salary, it may be a red flag that they are funding their lifestyle with your company’s money.
By running a credit check and a background check, you can be sure that you are bringing someone on board with no criminal record to protect your business.
Keep security measures up to date.
Phoenix Police encourage proactive security measures to prevent theft at your business before it happens. To protect the physical security of your business, be sure to engrave “Do Not Duplicate” on keys to your office or any locks that protect sensitive information. Installing security cameras could also be beneficial should you ever need to see suspicious employees coming and going outside of normal business hours.
If an employee is being discharged, be sure to change locks and security codes, especially if they had high clearance access. Most importantly, make sure to regularly review your company bank statements. If there are large amounts of money missing or moving around to vendors you don’t recognize, you might be witnessing a scheme that could leave you on the out.
Review your coverage and business insurance policy.
Theft and embezzlement are often played out over many years. A typical embezzlement scam runs about 5 years and averages out to $2.2 million in losses for a medium-sized business. Schemes can often go for over 10 years, with double the number of losses.
If you’re bundling your insurance and have low theft coverage it might be time to re-think your business insurance. Small and medium-sized businesses often overlook this type of insurance finding it costly or might believe that they don’t have any exposure to employee theft. It’s essential that as a business owner, you don’t have the mentality of “it could never happen to you.”
About CopperPoint: Founded in 1925, CopperPoint Insurance Companies is dedicated to protecting and empowering conscientious business owners. Our vision is to be a top-tier regional commercial insurance company and the preferred partner for business owners, agents and brokers in every community we serve. For over 90 years CopperPoint has been a leading provider of workers’ compensation insurance. Today we are a multi-line commercial insurance company, offering products such as general liability, property and casualty, crime, inland marine, commercial auto, cyber and employer practices liability insurance to ensure peace of mind to conscientious business owners, their employees and customers.