5 Tips to Keep Employee Theft from Running You Out of Business
Employee theft is a big problem for small businesses. According to the U.S. Chamber of Commerce, 75 percent of employees steal from their employers (most repeatedly). A typical business loses as much as five percent of revenues due to employee fraud and, says the National Federation of Independent Business, an employee is 15 times more likely than a non-employee to steal from a company.
Staggering figures like these may be hard to accept, but unless you take precautionary measures, their reality will likely affect your business in a tangible way. Here are five tips for preventing or stopping employee theft:
- Create an anti-theft policy and enforce it. This is just the starting point, but it’s absolutely essential. An effective policy must address actions like pilfering inventory, stealing cash, skimming off vendor deliveries, accounting fraud, and forging or hiding receipts. Put your policies and procedures in writing — and provide them to every employee (who should also sign a form acknowledging receipt of these guidelines). It should be understood the penalties for theft or fraud may include immediate termination and legal action.
- Hire wisely. Few business owners, if any, would knowingly hire dishonest people, but sidestepping employee background checks can amount to the same thing. Make references a condition of employment, and then check them, including candidates’ previous employers. Experts also advise checking public records for any civil and criminal history for relevant lawsuits, frequent or serious driving violations, and anything involving violence or fraud.
- Conduct surprise audits. In addition to regular audits, conduct unannounced financial and fraud assessments. These surprise audits not only alert you to possible weaknesses in your system, but also make a clear statement to employees that you’re serious about fraud prevention.
- Create a culture of “theft prevention awareness.” A few basic precautions can help establish an atmosphere of vigilance, rather than fear and blame. You’re the person in charge, so it shouldn’t come as a shock to anyone if you happen to do a spot inspection of a shipment or check the cash register from time to time. Make sure business records are organized and kept up to date, so you can easily review them whenever you choose. Security experts also advise instituting an anonymous reporting system. Encourage your staff to report suspicious activity or potential violations of policies and procedures. (The reporting system can extend to vendors and customers, too.)
- Build healthy relationships with your staff. You can prevent or minimize internal theft and fraud by maintaining healthy relationships with your staff. Employees who are paid fairly, who can approach you with issues and concerns, and who feel empowered to make decisions and take action are far less likely to steal from you than those who feel cheated or undervalued.
Lee Polevoi is an award-winning business writer specializing in the challenges and opportunities facing small business. He is former Senior Writer at Vistage International, a global membership organization of CEOs.