Employee theft is more prominent than most business owners realize. The average business loses approximately 6% of revenue to fraud each year, and typically employees are to blame. Nearly one-third of business bankruptcies are due to employee fraud. Chances are at least one of your employees is stealing from you right now.

The first step to preventing employee theft is to know the common avenues, keeping in mind that it is not limited to just these forms.

• Forging Receipts – charging extra and pocketing the difference.
• Pocketing Loose Change – Employee assumes that a dollar here or there won’t be missed from the petty cash box.
• Stealing Supplies – taking a pen or paper clips on a regular basis because they don’t believe it will negatively affect the business.
• Stealing Equipment – taking equipment to a job site and then taking it home, often claiming it was misplaced or stolen.
• Reimbursement Fraud – claiming they provided items to the company, but never actually doing so. This also includes embellishing on expenses they incur while working, such as mileage.

There are a number of preventative measures you can take in order to sway your employees’ temptation to steal from the company.

Implement Easier Systems
Confusing and complicated accounting or bookkeeping systems, often those done by hand, make it easier for employees to cover their tracks when committing fraud. Small businesses are at greater risk because they typically rely on only one person to handle the accounting responsibilities since the system is so complex.

Avoid this temptation by implementing a simpler accounting system, such as accounting software. Also, consider cross-train people in your company on that system, including yourself, so that there are checks and balances. If more eyes are examining the books, the errors, whether intentional or not, will more easily be found.

Use a “Check-Out” Method
For businesses that have equipment that is used outside the work place, consider requiring you employees check it out. Have them write down the date, their name, the piece of equipment, the job site, etc. When they are through using it, have them check it back in. This will allow for you to hold a particular person responsible for the equipment, should it not be returned to the business.

This system may not work as well unless someone is in charge of it. If possible, you should have them come to you to check equipment out. If your busy schedule does not allow for you to keep track, put one or two people in charge of it that you can count on to be honest.

Eliminate Exit Options
Many businesses that have a night shift see a sharp increase in employee theft during that time. Often it is because the employee has too many unmonitored exiting options. Night shift employees should only have one or two exit locations. Those locations should be equipped with video surveillance or guards to be sure that no one leaves the building with unauthorized company belongings.

Get a History Before Hiring
Before hiring a new employee, obtain both their criminal and credit history. Surprisingly, the credit history is probably the more important of the two. If a potential employee is overwhelmed with debt, then the pressure to steal from your business increases dramatically, often convincing himself that he needs it more than you do.

Implement a Company Theft Policy
This is probably the most effective preventive measure you can take. In the policy, explain the company’s code of ethics. Specify the rules regarding office supplies, company equipment, etc. Be sure to indicate that employees who steal from the company will be prosecuted. Have each current employee, and all new employees upon hire, read and sign the policy to be effective immediately.

Have a Company Meeting
If an employee is discovered stealing from the company, it would be a good idea to call everyone together and let them know what’s going on. Outline how these actions negatively affect the company by providing them with the actual numbers. You’ll be surprised how many employees don’t realize that their unethical actions could destroy your business, and their job.

Implement an Anonymous Reveal Method
Provide a means for loyal employees to anonymously notify you of employee theft within the company. The pressure among co-workers to protect each other is strong, but anonymity will provide an employee with piece of mind on all levels. Employee Theft Anonymous is a great online source for allowing loyal employees to combat the fear of being a tattle-tail.

Don’t allow employee theft to get the best of you by hoping it will just go away without any effort on your part. The longer you let it go unchecked, the bigger the threat to the well-being of your business. And remember, more often then not, it is the veteran employee, who knows your business well enough to find the cracks, that takes advantage of an opportunity. Take action and smother the temptation before it has the chance to surface.

Sources:
• Inc.com: Are Your Staffers Stealing?
• Small Business Association: Common-Sense Measures for Preventing Employee Theft

Related Readings:
•CNN Money:Arresting Employee Theft
• About.com: Employee Theft - The Profit Killer
• Inc.com: Employee Theft Still Costing Business

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