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Addressing Employee Theft

Date: 02/22/2007 | Category: Business | Author: Diana Heeb Bivona

Employee theft and fraud is an ongoing problem that costs businesses, particularly small businesses, big money.  In fact, the Association of Certified Fraud Examiners (ACFE) estimates that  a typical business will lose an average of 6% of revenues from employee theft.  What is even more shocking is a a U.S. Chamber of Commerce survey which reported that one-third of business bankruptcies are due to employee theft.

Small businesses often have a more difficult time in addressing the issue because they simply lack the resources needed to detect fraud.  There are several steps a small business owner can take to limit their exposure to employee theft and fraud including:

  1. Thoroughly investigating applicants prior to hiring.  Pre-employment background checks are an excellent way to cut down on hiring dishonest employees.  It may seem time consuming to have to check someone’s criminal and civil history for signs of theft and/or fraud, to check their driver’s license for serious or repetitive violations, and to verify their previous employment record and education, but its a small investment in terms of what it saves you in possible theft.
  2. Implement the proper controls and reporting systems.  Every business should have a system in place that regularly assesses everything from the effectiveness and efficiency of their operations, to their compliance with laws and regulations, to how assets are safeguarded, and how accurate their financial reporting system is.
  3. Investigate problems.  If there are allegations made by another employee or there is evidence suggesting a fraud or theft, thoroughly investigate the incident and gather all the facts to make an informed decision.  If left unaddressed, chances are it will occur again or grow worse.

Finally, create a positive work environment for everyone in the organization.  Encourage employees to follow established policies and procedures, to act in the best interests of the organization and to keep the lines of  communication open so that issues can be immediately addressed should they arise.

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