Employee theft is rampant in small to mid-sized businesses. It never ceases to astound people that a trusted employee could steal from their employer. It is happening every day. Large amounts are being stolen from businesses both small and large.
The Truth About Employee Theft
After the Enron debacle, Congress passed “Sarbanes Oxley” to tighten the responsibility of the accountant to detect fraud. Talk to someone in the accounting community about SOX and they will roll their eyes and heave a large sigh. In all levels of the attest function performed by accountants (compilation, review and audit), SOX has had an effect. The result of this increased testing is that more employee theft than ever before is being uncovered. In fact, the AICPA (American Institute of Certified Public Accountants) released a study that gave some astounding statistics. According to their survey of members, up to 82% of small to mid-market businesses have or will experience employee theft. Among the incidences of theft uncovered, the average theft amount equals $125,000!! And believe it or not, most of these thieves are not prosecuted.
Are you a victim? Most of us would immediately say “No, all my employees are completely trustworthy.” But, what about the next employee you hire? What about the employee who has had an unexpected life change (divorce, death, or other experience) that has affected his/her financial stability? What about that employee’s spouse who you might not quite trust? Could that person have undue influence to convince your employee to do something untrustworthy?
Examples of Employee Theft
- Cash. Does the employee who collects the cash also make the deposit and reconcile the bank statements?
- Payables. Does the employee who makes the vendor payments reconcile the bank statement? Does this employee have access to online accounts or a signature stamp?
- Time. Do your employees steal time by running personal errands or spending excess time on the phone as you are paying them for doing the company work?
- Company credit cards. Do your employees have company credit cards? Are the expenses charged to these cards reviewed by someone other than that employee?
- Computer access. You would be amazed at how many employees run a small business on your computer and on your company time.
How Can You Stop Employee Theft?
- Have a policy that strictly forbids the above activities (and other similar activities).
- Look at your business functions and determine where you are vulnerable.
- Make sure there is a separation of duties between employees who handle areas where theft could occur.
- Consider monitoring where employees spend their computer time.
These are just a few of the ways an employee can steal from their employer. But luckily, there are also many ways an employer can prevent this activity. Being aware is the first step.
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photo credit: <a href=”http://www.flickr.com/photos/143134916@N06/29173834306″>Despairing businessman at his desk</a> via <a href=”http://photopin.com”>photopin</a> <a href=”https://creativecommons.org/licenses/by/2.0/”>(license)</a>