Last week we covered ‘8 Warning Signs Your Employees Are Stealing’ and today we are concluding our mini-series with tips on how to prevent your employees from stealing.
In our previous article, we discussed that about 75% of employees have stolen from their employer once and about 38% have stolen at least twice. And, according to a 2016 report from the Association of Certified Fraud Examiners, the median loss is $180,000 for both big and small privately held businesses. No matter the size of your business, $180,000 is a lot of money lost.
So what are some things you can do as an owner/operator to prevent your employees from stealing?
#1. Observe your employees.
Be alert to key indicators of potential theft such as:
#2. Supervise employees closely.
Not surprisingly, studies show that when supervision is lax, theft and fraud rates go up. This doesn’t mean looking over their shoulder every minute. But it does mean checking what they do. It’s also wise to have more than one person looking out for your money.
#3. Use purchase orders.
The payment, receipt and preparation of purchase orders should be separate functions and handled by different individuals. Use serially pre-numbered purchase orders and always verify incoming orders. Trust, but verify.
#4. Control cash receipts.
Use serially pre-numbered sales slips and conduct weekly/bi-weekly audits. Balancing of sales slips and register receipts should be done by someone other than the sales clerk. Having checks and balances is crucial when maintaining financial integrity.
#5. Conduct informal audits.
Make unannounced internal audits and have a yearly audit performed by an outside firm. It is good for any and every business to be audited by an outside firm. It’s just smart business.
#6. Install computer security measures.
Understand your computer systems and software, and how they might be used to divert money or inventory. Restrict access to computer terminals and records. Periodically change entry codes and check regularly to ensure that security procedures are in effect.
#7. Track your business checks.
Always use pre-numbered checks, with amounts and payees typed or written in permanent ink. Producing all checks from financial software such as QuickBooks is highly recommended. Lock blank checks and a signature machine, if you have one, in a secure place.
#8. Manage inventory and use security systems.
Separate receiving, store keeping and shipping functions. Physical inventories should be done annually by individuals who are not responsible for inventory records. Some businesses also install security devices to monitor merchandise or inventory.
#9. Beware of accounts receivable.
Make mail-opening and posting separate functions. Record checks and cash in appropriate registers and stamp checks for deposit only.
#10. Provide a way for employees to report theft or fraud by co-workers.
This needs to be done carefully to avoid signaling you don’t trust employees. But it can be highly effective and let’s employees know that you respect their opinions and listen to them.
We hope these tips help and prevent any loss your business may be experiencing!