Prevent Employee Theft and Fraud

An employee is 15 times more likely to steal from an employer than the general public

Employee theft and fraud takes many forms including outright theft, skimming (diverting business funds), fraudulent disbursements (billing schemes, inflated expense reports, cheque tampering), stealing inventory and stealing business customer lists or other trade secrets.

The U.S. Department of Commerce reports that nearly a third of business failures are related to employee theft or fraud. Research has shown that an employee is 15 times more likely to steal from an employer than a member of the general public. Why? – Because they have the opportunity.

To reduce employee theft and fraud businesses need to:

• Know their employees – Be alert to key indicators of potential theft such as lifestyles well above salary levels, compulsive gambling, persistent borrowing or financial problems.
• Supervise employees closely – When supervision is lax, money tends to disappear.
• Have strong internal controls in place that ensure the payment, receipt and preparation of purchase orders should be separate functions and handled by different individuals.
• Control cash receipts – Use electronic cash registers recording every sale and have security cameras over all tills.
• Install computer security measures that restrict access to computer terminals and records.
• Manage inventory by separating the receiving, store keeping and shipping functions, performing an annual physical stocktake, and installing security cameras.
• Verify suspicions by investigation, and determine the extent of fraud and methods used. If you can identify the responsible employee, terminate their employment and consider further legal action.