By Jack Belo, Associate
Is your company protected from employee theft? Employee theft is extremely costly for any company and according to research, the median amount stolen is approximately $175,000. An employee’s motivations and opportunities to steal from their employer are different from those of people outside the organization. In many cases, the employee has better opportunities to steal having knowledge of the internal controls of the organization and how to avoid them.
There are a number of steps a company can take to better protect themselves against employee theft. Here are five options to reduce employee theft:
- Lead by Example. The corporate office culture has a large influence on its employees. When policies of an organization are well communicated at different levels, misunderstandings are less frequent. Employers should train employees about acceptable ethical office behavior and set good examples. A good example set by management influences how employees will act.
- Segregation of duties is the most common internal control that companies use to protect themselves against internal and external threats. Requiring checks be signed by a different person other than the one who wrote it or having the deposit made by someone different than the person posting accounts receivable are examples of segregation of duties. Requiring staff to take at least one week of consecutive vacation, while a qualified staff member fills in for them, is a good way to shed light on nefarious activities that are being covered up. These controls make it more difficult for an employee to steal funds without the cooperation of other employees.
- Restrict Petty Cash. An effective method to protect the company from its employees, is limiting the amount of cash on hand. If it is known that a company has large amounts of petty cash, employees will have a greater motivation to steal the money. Companies should have procedures for the amount of petty cash to be held on hand, where it is stored, and who has the authority to access it.
- Monitor Statements and Reports. Reviewing bank statements and interim financials will help management review performance for irregularities. Partners or managers of the company may be able to identify when certain accounts appear skewed. The most common accounts likely to be affected by employee theft include payroll expense, office expense, and fixed assets. Having someone other than the person that writes the checks reconcile the bank statements is good practice.
- Conduct Background Checks. Background checks are possibly the best way to prevent employee theft. By screening candidates before they become an employee, a company can better ensure the people they hire do not already have a criminal record.
Following these simple steps will help ensure a company is taking the appropriate actions against employee theft. Do not let this happen to your company. If you have any questions or concerns regarding employee theft or would like a fraud risk assessment, please contact CST Partner, John Persil.