When employees steal: Five reasons your business could be vulnerable to fraud
Filed under: Entrepreneurship, Ripoffs and Scams
The last thing you want to discover is that one of your employees is stealing from your small business. Not only is it a total violation of your trust, but internal fraud also has the potential to put you out of business. According to the Association of Certified Fraud Examiners, businesses lose an average of 5% of revenues each year to fraud. Could your company survive if an employee stole 5% of your revenues?
My new book, Essentials of Corporate Fraud, details many of the red flags that may point to fraud in your company. There are literally hundreds of warning signs that might indicate an employee is engaged in a fraud scheme. Here I'll just mention a few:
Is an employee struggling with personal problems? Employees with financial troubles, addictions, chronic legal problems, instability in their personal lives, or unusual work habits might be more likely to commit the fraud.
Are accounting errors popping up? A company's accounting process and financial records might also point to an ongoing fraud. Some of the best business software will alert you if bookkeeping entries don't line up the way they should.
Are you putting too much pressure on employees to meet sales targets? When financial goals loom large, industry conditions are difficult, or employee bonuses are on the line, fraud may help ease the burden.
Are you too loose with company keys and passwords? Companies that have lax policies and procures are more likely to be defrauded. Allowing employees too much autonomy can also create an environment in which fraud goes unchecked.
Do you actively encourage honest, straightforward business dealings? Management must model ethical behavior and enforce the code of ethics in order to prevent fraud.
This post just scratches the surface of a complex topic. But if you want to know more about fraud risks and indicators check out my new book. In Essentials of Corporate Fraud I go into a lot more detail about how the most common frauds are perpetrated and the ways small businesses can stop fraud in its tracks.
You wouldn't leave the company's doors unlocked overnight, would you? Don't leave the 
company's assets, information, and money exposed for your employees to steal. Learn about fraud and start preventing it in your company.
Tracy L. Coenen, CPA, MBA, CFE performs fraud examinations and financial investigations for her company Sequence Inc. Forensic Accounting, and is the author of Essentials of Corporate Fraud.
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Reader Comments (Page 1 of 2)
3-17-2008 @ 7:17AM
mike said...
all employees steal if its not cash its supply's or time I like to fire the dead wood right before Christmas while I make a big deal out of how big the bonus is to the faithful working personal Merry Christmas looser. Some of these people actually feel I owe them all they can steal as a perk to the job
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3-22-2008 @ 4:13PM
John said...
Absolutely agree.
I had these 2 brothers( yes mistake) as installers for me and both thought that my business was their personal shopping cart for side business they did.
They used my company vehicle for road trips, and stole supplies.
I was far too trusting and learned the hard way not to trust anyone.
These guys not only stole from me but bad mouthed me to other employees.
I got rid of them both this past January. I only wish I had done it before Xmas!
Things I learned:
Never give a credit card to an employee who doesnt
comply with company policy ( receipts)
Never allow an employee to take a company vehicle
home
ALWAYS do a physical inventory
3-17-2008 @ 7:24AM
greg said...
I agree that if you are too trustworthy they steal. It happened all the time to me until I treated all of my staff like animals. You can not trust them, be anyone's friend, etc. They will ALL ROB YOU BLIND!!
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3-17-2008 @ 8:56AM
sed said...
GREG IS TELLING YOU THE TRUTH EMPLOYEES WILL STEAL FROM YOU AND LOOK YOU IN THE FACE THATS WHY YOU GOT TO TREAT THEM LIKES A DOG AT TIMES
3-17-2008 @ 9:31AM
cyberrun said...
If you have good guidelines for checks and balances, you don't have to treat your employees like animals.
Who cares about a pen or pencil? I had someone once, under me, that said that he liked to keep just the employees feeling like they were always on the edge.
You have to nip that in the bud. That kind of attitude often get's you more of the attitude that you don't want from employees. If you have the right policies, checks and balances and your employees know that they are there and enforced, then there is less chance of people stealing from you.
Then you can treat them like human beings and have productive morale. Then the good employees will often help you weed out the not so good employees.
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3-22-2008 @ 2:20PM
Gary Stoltz said...
If you treat them like humans and have a good set of checks and balances it should lessen the problem. Sometimes it's the goody two-shoes who tell on everyone that do the most damage. You're going to have employee theft no matter what. The trick is being able to minimize it.
3-17-2008 @ 9:35AM
cyberrun said...
Well, by your comments I would guess you are not hiring the right people, and that if you really treat them that way, perhaps stealing from you is a lot easier.
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3-17-2008 @ 9:38AM
Mo said...
I own a very small business. I guess I am lucky so far. I have never had anything come up missing and my books are always balanced. I can account for everything I have. Sure...once in a while an extra long lunch is taken, but they stay later to make sure everything gets done without me even asking.
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3-22-2008 @ 2:45PM
Suzan said...
I BELIEVE PEOPLE ARE SO NAIIVE, BECAUSE DEEP DOWN EVERYONE BELIEVES THAT PEOPLE ARE GOING TO BEHAVE LIKE NORMAL HUMAN BEINGS AND UNFORTUNATELY IT JUST ISN'T TRUE.
i HAVE WORKED IN EMPLOYEE SURVEILLANCE FOR ONE OF THE BEST PAYING, BEST EMPLOYEE, FREE LUNCHES, STOCK OPTIONS & BEST BENEFITS COMPANY IN THE WORLD AND I HAVE CAUGHT CUSTOMERS AND EMPLOYEES STEALING BLIND.
MOST IMPORTANTLY PUBLIC COMPANIES ARE MISSING THE REAL PICTURE INSIDER TRADING. THIS IS WORSE THAN ANY 5% REVENUE LOSS; IT CAN DESTROY THE ENTIRE CORPORATIONS' IMAGE.
I DISAGREE ABOUT THE "PROFILE" i HAVE BUSTED EVP'S WHO ARE MAKING HUGE SALARIES; USUALLY WHEN PEOPLE STEAL IT IS DONE FROM ARROGANCE NOT LOW SELF ESTEEM.
3-17-2008 @ 12:18PM
Ray said...
Employees steal when the perceived need and opportunity is presented to them. Employers can only control the opportunity.
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3-17-2008 @ 12:39PM
DAVE said...
I WORKED IN A NEW CAR DEALERSHIP FOR 15 YEARS, I BOUNCED AROUND FOR A COUPLE OF YEARS AND HAVE WORKED IN 8 DIFFERENT DEALERS. ALL OF THEM HAD WHAT WE CALL "BACK DOOR CHARLIES". THIEVES HAVE A WAY OF TRYING TO COVER THERE TRACKS.
PARTS WERE BEING STOLE AND SOLD OUT THE BACK DOOR OUT OF EVERY ONE OF THE DEALERS I WORKED AT. MOST OF THEM BEING BILLED TO USED CARS OR SERVICE CATCH ALL BILL. ONLY A GOOD MANAGER THAT KEEPS TRACK OF EVERY THING CAN CATCH THEM.
NOW I HAVE MY OWN REPAIR SHOP AND ACTUALLY CAUGHT THE LOCAL PART STORE TRYING THE SAME TACTIC, BILLING ME FOR ITEMS NEVER RECIEVED OR NOT REFUNDING RETURNS PROPER, I NO LONGER DO BUSINESS WITH THEM, BUT COST ME $1000.00 AND A GOOD AGRUMENT TO RESOLVE THE ISSUE.
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3-17-2008 @ 12:40PM
KEN said...
i am not an owner just an employee, have worked for small family trucking company for 3 generations of owners. i have been employed here for 16 years. i have plenty of chances to steal big and little. my employers have always been there for me thru the years. I would never steal just because they treat me so damn good. i feel like it would be like stealing from my mother. they know i am a loyal employee and i have several under me.
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3-17-2008 @ 1:28PM
Bill said...
The greater majority of employees are honest. The way to head off theft in the workplace is to hire honest people from the start.
A comprehensive background check (including a criminal search) does not cost as much as some people think and can help eliminate those who may cause your company problems in the future. Not only theft can be a problem but workplace violence issues may leave your company exposed.
I have been conducting employee screening and due-diligence investigations for over 25 years and they are still the best insurance for limiting corporate liability!
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3-17-2008 @ 2:08PM
mark vollertsen said...
If everyone would refer to the 10 commandments and follow God's Word. This would not be an issue, not even a article of discussion. ***Jesus Saves***
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3-17-2008 @ 11:08AM
Tracy Coenen said...
Mark - I completely agree with you. Unfortunately greed and low morals win out much of the time. I will never, ever be unemployed thanks to the dishonesty of many!
3-17-2008 @ 2:39PM
mike n said...
Most employees steal not because they are hard up on little money and are trying to get something for nothing. They steal because it makes them feel good. They want to see what they can get away with by making managment feel bad. The bad boss will want everyone to work every minute. Often the entire office will suffer from poor morale by being treated like animals by managment. Good Managments treat their workers like humans, and happy humans will then return the favor by working hard and earning a honest day's pay.
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3-17-2008 @ 4:32PM
Pat said...
I think that America expects way too much from employees, you get treated how you are treated, I personally have worked for many companies, I currently work in the state of Nevada and have for 14 years it is a "AT WILL" of employment you can be fired anytime, I am loyal faithful never missed a day, when I get treated like crap I usually give a 10 minute notice, NO JOKE, I have references. I will not allow mis treatment, if I was treated like a dog that would be great, most dogs get treated with love and respect. I would love for any of you bosses that treat people bad to have me for one day I am sure you would change the way you treat the next employee.
3-17-2008 @ 4:57PM
jake said...
i learned using the theory "keep them hungry" if your to good to them they will rob you blind. keep them hungry and they will need you more than you will need them...
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3-17-2008 @ 10:56PM
marylouise said...
Jake,
Taking into account that you may have dashed off your response in haste, I find you have some typographic errors in your posting. The "your" in the first sentence should properly be "you are". The "to" in that same sentence should accurately be "too". Perhaps if I were your employee, I could be sure that your correspondence gave a better impression of you as a business owner. Having been a business owner earlier in my career, I can relate to this hot-button issue. The way to keep a lid on pilfering or out-and-out stealing is to be sure to have internal controls and audit them on a regular basis. I have always found that the way to keep GOOD employees is to pay them a fair wage (as meets with the median income in your area).
3-17-2008 @ 7:33PM
me said...
As a wise coworker once told me, I don't sh_t where I eat.
As a Christian, I figure even if I didn't get caught by my employer, God is always watching. It's not worth breaking one of his commandments and jeopardizing my soul for eternity.
As a small business owner, it's tough enough to make a living. Profit margins are being squeezed by the cost of health insurance and gasoline. People think you have deep pockets when you own a business and that you won't miss it if they steal. Unfortunately, nothing could be further from the truth.
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