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5 ways to prevent employee theft

According to http://www.statisticbrain.com/employee-theft-statistics/

Commonly referred to as borrowing.

Employee theft is so common and yet most business owners attribute the problem to bad apples and believe they have done enough to prevent employee theft by hiring good people that they like.  While hiring good people is important there is a big difference between people you like and people you can trust not to steal from you.  If you google employee theft you will find the same numbers provided in this blog with variations depending on whether they are talking about all business or just small business.  However, all business owners attempt to hire people they like.

The reason employee theft is so rampant isn’t because of bad apples.  It is because of the ORI syndrome.  Who should make the money my skills are bringing in, the business, ORI?  ORI Stands for Opportunity, Rationalization and Incentive. The opportunity is made up of poor procedures and poor deterrents.  Rationalization is made up of unhappy employees. This unhappiness can be caused by criticism regarding work performance, layoffs or several similar factors.  Incentive is present when employees have personal financial difficulties caused by low wages or caused by addictions or dysfunctional spending in some way.

It is when we start to discuss the true solution to the problem where I differ strenuously with the articles readily available on the internet.  These articles suggest that you develop relationships with your employees, put some time into putting procedures in place and one article even suggested you could lie to employees about having a security system installed.  I have personally worked at a company who tried this and it seem to encourage discussion about how employees knew it was a lie and therefore would be very capable of stealing if they so wished.

There are 5 important steps to protecting your business from employee theft.

1-     Install a security system which covers 100% of your business and pay for monitoring and storage.  You must have a habit of reviewing some part of this material on a weekly or monthly basis.  You can also return to this footage should questions or concerns arise.  (A must in any business that deals with cash)  In businesses that handle transactions on the computer the security system should be computer based as well.

2-     Hire a reputable outside firm or consultant to customize an asset management policy which accounts for the unique way your business operates.  Enforce it strictly, letting employees know there is a big difference between borrowing from the business without asking and borrowing from the owner by asking.

3-     Hire the same firm or consultant to analyze your audit the business, analyze bookkeeping practices and suggest an appropriate division of labor.  Some portion of your bookkeeping should be outsourced.  Keeping  all bookkeeping tasks in house encourages employee conspiracies which lead to bigger losses.

4-     Arrange for your consultant to act as a second set of eyes.  It should be very inexpensive for a professional auditor to look over your books on a monthly basis.  It won’t take them a lot of time either.  The reason external audits are so expensive is because they are typically examining a large period of time, looking at data spread out all over the business and rarely sure exactly what they are looking for.  After going through the process suggested with a consultant, a monthly examination of your books can be very focused on five or six specific metrics which suggest whether you might have an employee theft problem.

5-     Topics in asset management should be discussed during a monthly meeting with all employees.  Certainly topics outside of asset management should be discussed as well but the security system, signed asset management procedure and consistent discussions during meetings should put a real damper on an employee’s thoughts that opportunity might exist in your business.

Sadly, I have only been asked to address employee theft after a major incident.  Don’t think this can’t happen to you!  A good consultant can help you save your business within a reasonable budget.  Feel free to call on me for some more free advice!

Matt Pickett
BOA Business Owners’ Assistant