How to Watch Out For Embezzlement

No one really wants to think about embezzlement, but when you’re running a small business, embezzlement has to be on your radar. Luckily, there are many steps that you can take to help prevent your business from being affected by a fraudulent employee.

Embezzlement vs. Larceny

Before learning some tips to protect your business, you might be curious about the difference between embezzlement and larceny. Both are serious problems to any business, and there is only one subtle difference between the two. In its simplest explanation, embezzlement occurs when an employee takes rightful property, whether money or goods, from their employer before that property is actually in the employer’s possession. For instance, if a retail cashier pockets the money paid by a customer for a product, instead of placing that money in the appropriate till or cash drawer, that employee is committing embezzlement. In the case of larceny, the employee is actually stealing directly from the company’s already present money or products. An employee committing larceny might, for example, simply steal from current inventory.  

Either way, you want to protect your business. Here are some tips to help ensure the safety and security of your goods and services:

Perform a Detailed Pre-Employment Screening Process

You'll want to ensure that each of your employees has been thoroughly vetted. Consider running a police, or background, check on your job candidate. Such checks are becoming more and more routine, even including checks on the applicant’s identity. Closely scrutinize resumes, phone references, and even go so far as to check out your candidate on popular social media websites, like LinkedIn. All of this can often bring up things that you may not have expected, and may not have known about if not for your research. It’s also important to remember that you can learn a lot about an employee from asking how and why they left their previous employment.

Define Standards

It may sound far too simple, but having an employee manual or guidebook is a good way to immediately lay out your standards to all employees. Describe the jobs within the company, as well as the duties that go along with each. Ensure that you specify that fraud or any other such behavior is not in keeping with the company culture and will not be tolerated.

Separate Duties

You don't want any one person in your business having complete control of your finances. Not only will this help if the employee cannot be at work, but it will ensure that no one person can defraud you from start to finish.

Separate the duties between employees. If one person is responsible for bookkeeping, someone else should be responsible for writing checks, and so on. This is an area where remote bookkeeping can seriously help. TCA Darwin staff is highly skilled in all of the common cloud-based accounting software, eliminating any one staff member in your business having too much financial power.  

Cross-Train

Just as you don't want any one person responsible for your finances, you want to ensure that at least a few different employees are cross-trained in all sections of your business. Not only will this ensure that you have someone trained to take over in the event that an employee cannot be at work for any reason, but it makes it much easier for employees themselves to spot when suspicious activity is taking place. Have a plan for reporting, as well. Encourage employees to say something to management if they see something that isn’t honest.

Foster A Comfortable Environment

If you make a comfortable environment for your employees, they'll respond in kind. Ensure that they are fairly compensated while performing their jobs and praised when going above and beyond their duties. Employees who like where they work will be more likely to take pride in their work, and will then be less likely to steal or embezzle.

You might also consider having a designated location where employees can go to report their suspicions. They will need the ability to do this anonymously, so have something like a tip box where employees can express their concerns. They will be less likely to report if they think that other employees are aware that they are reporting, so you’ll want to make sure that this can be done discreetly.  

Avoiding Embezzlement with TCA Darwin

Yes, some employees steal. But, it’s important to remember that your staff can also be one of your greatest lines of defense. It is often another employee who first notices something suspicious about a co-worker’s actions.

Embezzlement is something that all business have to deal with, and it’s hard not to worry. After all, your putting your business in the hands of others daily. TCA Darwin is here to help. Our remote bookkeeping and auditing processes are not only convenient, but they are also an ideal safeguard for your business.

Book an appointmentat our Darwin or Palmerston office to discuss your concerns and needs.