According to the 2007 National Retail Federation survey, retailers lost 41.6 billion dollars to theft and fraud. The majority of retail shrinkage last year was due to employee theft, at $19.5 billion, which represented almost half of the losses (47%).
While large corporations can usually weather the financial impact of employee embezzlement, the problem hits smaller organizations much harder. In many cases, business owners have lost their life savings to a bad hire. Even medium-sized companies can falter under the impact. Below, I’ll describe 4 ways in which an employee can steal from you. Then, I’ll explain the best way to prevent it from happening to your business.
#1 – Inflated Expense Accounts
Expense accounts are important for a variety of businesses. However, left unchecked, an employee can easily fabricate expenses, claiming reimbursement for money that was never spent.
#2 – Tampered Payroll
Payroll fraud is more prevalent than many employers realize. A bad hire may add ghost employees to the payroll, claim wages that are unearned or unauthorized, or even steal and cash blank payroll checks.
#3 – Fraudulent Billing Schemes
A lot of organizations work with vendors, yet have no formal process by which purchase orders are reviewed and approved. Employees can easily establish fictitious vendor accounts, diverting payments to a P.O. box.
#4 – Register Theft
Businesses that operate in a retail setting can be victimized by an embezzling employee who steals directly from the register. In simple cases, the employee collects money from a legitimate customer for a purchase, but instead of ringing the sale, the employee pockets the cash. It can go much further, including falsifying refunds, voids and taking advantage of customers’ credit cards.
How To Prevent Employee Embezzlement
A major portion of employee embezzlement can be prevented. Employers must maintain a strict employee screening process and perform thorough background checks on job candidates. While uncovering past incidents of theft or misappropriation of funds can be difficult, the profiles of bad hires who are likely to commit fraud are often similar. The worst thing an organization can do is neglect the importance of screening applicants and doing comprehensive background checks.
Eliminating bad hires from the applicant pool can save your company the headache of dealing with theft, fraud and embezzlement.