According to the 2016 Embezzlement Study conducted by international specialist insurer Hiscox, small business owners who have less than 150 employees were found to be ten times more likely to be victimized by fraud, which includes embezzlement. Thus, business owners are cautioned by CPA Steve Sorensen. Embezzlement can, in fact, leave entire businesses vulnerable—from Fortune 500 businesses to that friendly neighborhood café—rocking them to their very core.
The Hiscox study also found that embezzlement occurs more often in the financial industry. Regardless of industry however, here are a few things business owners can do to help prevent embezzlement from happening in the workplace:
- Screen and conduct background checks on employees – There would be no incidents of embezzlement if there were no one to do it, which is why business owners should start at the very first step and conduct thorough background checks on employees. Screening employees involve calling up and actually speaking with the references they provided in their resumes to learn more about their job history. Additionally, business owners should also do a credit check if possible. Logically speaking, this is because employees who are under pressure for one financial reason or another such as a huge debt may be more likely to commit embezzlement.
- Adopt automated and biometric systems – Automation and biometric identification may not prevent embezzlement per se, but it can minimize opportunities for employees to steal. Keeping up to date with the latest business practices is advised by CPA Steve Sorensen. Embezzlement, for instance, may occur when a “trusted” employee uses the payroll system to divert funds for the gain of other employees he/she is in cahoots with or use it to overpay himself/herself. Business owners can protect themselves by limiting access to the payroll system or other financial controls.
- Foster a positive work environment – Workplace conditions can tempt employees to embezzle. For example, an employee that feels underpaid or suspects other employees are stealing may find nothing wrong with doing the same thing. A positive work environment then can open communication lines so business owners can find out what is happening on the ground. In some cases, embezzlement is a result of one’s desperation, but by establishing a positive and fair work environment, employees may not have to feel that they are already at the end of their rope.
Whether a cashier stole a few hundred dollars from the cash register or the payroll director stole hundreds of thousands of dollars, this is still embezzlement – regardless of the amount stolen and severity of the offense. Business owners should adopt a climate of zero tolerance in the workplace.