Driving Transactions
Thursday, July 18, 2024

By Andi Gray

Dilemma: I just heard from a business associate that their company got looted by a couple of employees. Over the span of a few years, the employees stole more than $400,000 and no one noticed. It’s not that my friend was an “absentee landlord” either. He runs a good company, pays his people pretty well, goes to work every day, and tries to keep an eye on everything. My friend is obviously devastated—and I’m scared that this could happen to me.

Thoughts of the Day: Theft of company assets is more common than you’d like to think. Put controls in place. Know what to look for while keeping in mind that a determined thief can make it hard to find things. Don’t put good people in a position to make a bad decision they might regret later on—but iftt they do make a bad choice, make sure you take them out of the game as permanently as possible.

Deal With Thieves Often employee theft is committed by first-timers under personal financial stress who justify the theft by thinking they’re due more compensation, and then find an opportunity to quietly remove funds.

Wondering who might steal what? Just about anyone—and just about anything. And it doesn’t stop at internal staff or inside your company’s walls: It could be anyone from vendors who might short you on delivery, customers who may feel entitled to a credit, or the cleaning crew swiping garbage bags.

When it comes to employees, cash is an obvious guess, but there are other creative ways to get the money when businesses like this industry don’t often deal with cash. Buying goods on a company credit card and then returning them for a cash refund is fairly common. Using company cards to get gas for their personal vehicle is another. According to one source, if you have a company vertical that does rely on cash, employee theft is 15 times greater than shoplifting.

Want to limit opportunity for employee theft? Don’t tolerate little infractions: An employee borrows money and forgets to pay it back. People take home samples without authorization. Petty cash comes up a little short. Inventory is slightly off.

Keep an open door and pay attention to complaints. Look for oddities and red flags. The proverbial cash drawer seems lighter than it should for the volume of activity the day before. A chauffeur’s gas card expenses just shot way up. Office supplies are depleted much more quickly than usual.

Use control tools. Mounting cameras in the office is a great deterrent. So are regular audits. Surprise inspections can help shed light on what’s going on. Requiring duplicate documentation signed by two people can help, but it isn’t foolproof if both are in on the scheme or if one of the two is gullible.

Don’t tolerate messiness when it comes to your financial records. If one customer or another is always complaining that someone forgot to post a payment, only posted part of a payment, or a trip was billed that wasn’t actually booked, pay attention. If garage or office inventory never get reconciled, insist that now’s the time, and watch over the process.

Look for warning signs. Cash seems tight, even after a series of good months. Reports don’t seem to add up. Every time you start to dig into things, an employee distracts you with something else. Trust your instincts and then verify if something is wrong.

Paying to put controls in place may be the cheapest solution of all. Eliminate the opportunity for theft in every way possible. And when you find instances of it, deal with it on the spot—don’t delay.

Once a thief is identified, I’ve known plenty of business owners who err on the side of settling things quietly. If they can get the employee to return the funds, they won’t seek prosecution. Or they worry about the impact that might fall to the employee’s family if law enforcement is brought in.

Theft is a big legal issue and bringing in the authorities is not just the right thing to do, it will also help to stop the perpetrator from carrying on their schemes with the next victim. If you have a suspicion, notify your local police department and ask them to investigate. They’re the pros. Let them do their job.    [CD0519]

Andi Gray is the founder of the Business Consulting Firm Strategy Leaders. She can be reached at andi@strategyleaders.com.