How To Avoid Employee Fraud/Theft

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Let’s continue this series on helpful hints for small businesses:

Did you know that  fraud is a primary cause of business failure and about a third of the small businesses failed as a result of  employee theft, fraud,  or employee dishonesty (according to Better Business Bureau)? These losses due to embezzlement affect small businesses especially hard because most small businesses cannot afford to absorb such losses. This is such a pervasive problem that even The West Wing used the data (as a threat to small businesses) in the script for one of its episodes (above video). According to the Association of Certified Fraud Examiners (ACFE), companies lose 5% of their revenues each year to employee fraud. Based on information gathered from the ACFE’s 2014 Global Fraud Study, the median loss caused by a single case of occupational fraud is $145,000. The study also revealed that companies with less than 100 employees had 28% higher fraud losses than larger companies. Such fraud/losses may come in the form of: cash theft, inventory theft, credit card/personal identifiable information theft, theft from customers, and theft of supplies.

To help insure the success of any businesses and avoid potential employee fraud/theft, these measures are recommended below:

1. Do background checks before hiring any one.
2. Get to know your staff well. The more you are aware of  your staff, the more you are able to keep an eye on things.
3. Communicate the seriousness of employee theft and potential consequences (failed company would translate into loss of jobs).
4. Implement checks and balances, audits and inventory controls to increase your knowledge of the inner workings of your business and regularly conduct these systems of protection periodically.

To protect your business in the case of fraud, embezzlement, or theft of a customer’s property, there are two types of bonds :

1. Fidelity Bonds provide coverage against loss from employee theft or embezzlement (not otherwise covered by a company’s insurance coverage). A bond may provide a blanket coverage for all employees’ actions, or may be specified to cover one or more specific employees).
2. Business Services Bonds: Any business that has employees entering a customer’s premises (be it customer’s home or businesses) should have a Business Services Bond to protect the owner of a “service” business from liability caused by the dishonest acts of its employees while on the premises of its customers. This  bond will reimburse you if your employee steals from a customer. You can then use the proceeds to reimburse your customer.

~Let’s Help One Another~

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Photographed, written, and posted by Windermere Sun-Susan Sun Nunamaker
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