Businesses lose about five percent of their annual revenue due to employee theft and fraud. In fact, according to the the U.S. Chamber of Commerce 75% of employees steal from their employers.
While there is no foolproof way of stopping employee theft completely, there are several steps you can take to dramatically minimize the effects it can have on your business.
Perform Pre-Employment Background Checks
Hiring the right person, especially if the new hire will work in sensitive areas or have access to sensitive information, by performing background checks should be an established business practice.
Knowing what you can ask about and use in the hiring process varies from state to state. The SBA has a Guide to Performing background Checks, which is a handy tool to reference when trying to understand the pre-employment background check process and the laws that apply to it. A person's criminal history, for example, may not be something you can use in your state.
Recognize the Red Flags
The signs are probably there, you just need to know what you are looking for. Things like:
- Minimum wage employees showing up with a new car
- Unexplained Debt
- Overly Protective About Their Workspaces
- Not Going on Vacation - Most violations are found when the person actually goes on vacation
- Employee Prefers to be Unsupervised or Take Work Home
- Change in Behavior
Put It In Writing
Establishing a theft and fraud policy as part of an employee handbook, or as a specific separate written policy, is very important. Establishing and defining what theft or fraud is will put the employee on the same page and understand what is expected of them.
If you allow employees to use company facilities for personal gain, for example, then make sure that process is clearly outlined and what the expectations are.
Once the policy is established and implemented, ensure employees are trained on the policy, giving adequate opportunity for employees to question any areas that are unclear to them. Then have every employee sign the document.
Perform yearly reviews and add any material that further clarifies the policy.
Perform an Audit
This one may seem like a bigger deal than it actually is. But performing regular audits and identifying high risk areas can alleviate or identify weak links in your company's procedures or policies. These areas may include:
- Expense Reports
- Vacation and Sick Reports
- Violations of Company's Email or Social Media Policy
- We Use Policy
- Cash or Sales Receipts
Employees who plan on stealing from you will always look for your weak points and seek to exploit them. Performing regular audits every 6-12 months will keep you abreast of potential areas of concern.
Establish the Right Management Tone
Setting the right management tone from the beginning will establish a strong foundation that employees will be able to identify and adhere to. Communicating the seriousness with which the company takes theft and fraud, on a regular basis, will put all employees on notice that it will not be tolerated.
Here are some additional steps you can take in establishing a good working structure and keeping you informed and what's happening with your employees:
- Establish Strong Internal Controls
- Require Employees to Take Vacations
- Assist Employees Suffering from Stress or Difficulties in their Life
- Hold Regular One-on-One Meetings
- Look at Unusual Transactions with a Suspicious Eye
If you have additional steps other managers can take that have worked for you, please comment on them below.