Listen to your team, treat them well, and keep an eye on them.
Of the many challenges facing small business owners today, one of the most critical is employee theft. It’s estimated that employee theft costs American businesses up to $50 billion per year, with each rogue employee costing retailers an average of $1,551.66. In 2020, 50% of retail owners reported an average loss of $1,000 or more, up from 29% in 2019.
This criminal activity comes in many forms, including skimming funds, disbursing money fraudulently, larceny, embezzling inventory or raw materials, and taking trade secrets or customer lists and using them for personal gain. Not surprisingly, employee theft is a major reason why business owners lose sleep at night. The good news is that there are many ways to prevent it. The first step is to find the causes of employee theft.
Why do employees steal?
What motivates a seemingly satisfied employee to steal from your company? The Association of Certified Fraud Examiners suggests three possible reasons:
- Motive. A staff member may have mountains of personal debt, a substance abuse problem, or simply a desire to live beyond their means.
- Rationalization. A lack of close oversight may lead the employee to think that no one will notice. They may believe they deserve a higher salary or think everyone else is already doing it.
- Opportunity. A flimsy cash management structure or generally weak financial oversight may present an open door that an employee can walk right through.
Most workers who steal are usually employed a few years before they start, and they do so for an average of three years before either leaving the company or getting caught.
What if you suspect an employee of theft?
First, tread carefully. Any accusations need to be backed up by solid evidence. Otherwise, you open yourself up to potential lawsuits. Conduct a thorough investigation to discover the scope of the crime and how it was committed. If you find solid proof, show the guilty employee the door and consult legal counsel about options for prosecution.
Of course, the best thing to do is prevent such theft in the first place. Here’s what you can do to protect yourself and your business from dishonest employees.
Establish anti-theft protocols
Consult your legal team and draft an anti-theft policy for your employee contract and handbook.
- Be upfront about the fact that this behavior will result in termination and possible prosecution.
- Be clear about what exactly constitutes theft or fraud.
- Spell out the consequences, including termination, police involvement, and legal action.
If your workers know that you have a plan of action if they commit fraud, they will be far less likely to try it.
Divide responsibilities
When you spread out duties, particularly in the day-to-day financial activities of your business, you reduce the ability of bad actors to siphon money away from the company. Separate the preparation, receipt, and payment of purchase orders and assign these tasks to different people.
Likewise with inventory management – give shipping, receiving, and store keeping duties to different people than those who keep track of inventory records. Also, consider installing monitored security cameras as part of inventory management.
Organize regular audits
Part of a proactive approach to theft prevention is to keep tabs on your finances. Random audits of cash flow and inventory can go a long way toward keeping your employees honest and your investors reassured that you have the situation under control.
Additional benefits of regular audits include:
- Checking that your security environment is up-to-date, a key tool in preventing theft.
- Reducing the level of risk, which can maintain executives’ and investors’ confidence in your ability to curtail theft.
- Ensuring that your company is compliant with all current regulations and industry standards.
Audits can also help you keep an eye on cash receipts, particularly if you use serially pre-numbered sales slips. Also, make sure that a supervisor, not the sales clerk, balances register receipts and sales slips.
Start a whistleblower hotline
The people in the best position to spot workplace theft are your employees. So give them a platform where they can anonymously report criminal activity. The vast majority of employees go about their duties honestly, so they will likely share your dismay that a colleague would take advantage of them.
Many businesses outsource their hotlines, which provides an extra layer of anonymity since no one at your company will see the complaints. Keep it simple – there are a variety of secure survey platforms that allow employees to fill out a quick form without oversight from a supervisor or eavesdropping from colleagues.
Give your staff some love
Arguably the most effective way to ward off employee fraud is to let your employees know how much you value them. Here are three easy ways to show your appreciation:
- Pay them well. The more they earn, the less likely they’ll feel the financial pull to steal. One of the world’s largest retailers just raised wages earlier this year.
- Praise them publicly. When someone does good work, make sure everyone knows about it. This not only raises their spirits but sets an example for others to step up their game.
- Say thank you. Not just with words (although, that’s nice, too) but with perks. Even something as simple as a gift card or a round of drinks can go a long way.
In short, show an interest in your team. Let them know that you need and respect them. When they feel valued, they will return that respect.
Keep an eye on things
Even with these preventative measures in place, it’s still useful to be able to see what’s happening at your business. You can’t be everywhere at once, so a monitored video surveillance system can make sure someone always has eyes on your cash and inventory. This can discourage employees from committing theft because they know someone is watching, and it also serves as a legal record of their actions.
Better yet, most modern surveillance systems pair with laptops and mobile devices so you can monitor your business from anywhere. But be aware of your employees’ rights when installing cameras. Keep them out of areas where they expect privacy, such as restrooms, locker rooms, and break rooms.
Stop theft before it starts
While employee theft may be an unavoidable part of a modern business, there are ways to meet it head-on and minimize its impact. Get to know your team, treat them well, and consider a monitored surveillance system to keep them and your inventory safe. Mobile Video Guard is a trusted partner in security, providing the cameras and know-how to ensure that your business is safe from theft. Contact us today for a free quote.
