I just heard from a business associate that their company got looted by a couple of employees. Over a couple of years the employees stole more than $400,000 and no one noticed. My friend is obviously devastated. And I’m scared that this could happen to me. It’s not that my friend was an “absentee landlord.” My friend runs a good company, pays his people pretty well, goes to work every day and tries to keep an eye on everything.
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 and know 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 if they do make a bad decision make sure you take them out of the game as permanently as possible.
Often employee theft is committed by first-timers, often due to personal financial stress, justifying the theft by thinking they’re due more compensation, and finding an opportunity to quietly remove funds.
Wondering who might steal? Just about anyone and just about anything. Vendors might short you on delivery. Or customers might not return goods for which you’ve issued a credit.
When it comes to employees, cash is an obvious guess, but there are other creative ways to get the money. Buying goods on a company credit card and then returning and asking for a cash refund is pretty usual. According to one source, in retail environments 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. The cash drawer seems lighter than it should for the volume of activity the day before. Returns are up. Prices for materials just shot way up. Shipments to new customers are well in excess of what those customers were expected to do. Parts of inventory seem much lower than expected — especially the most valuable parts.
Use control tools. Cameras everywhere are 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 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 they made or only posted part of a payment or they didn’t get a complete order, pay attention. If inventory never gets 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 business owners who err on the side of settling things quietly. If they can get the employee to return the funds, they’re good. 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 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.
BOOK RECOMMENDATION: “Preventing Workplace Theft: They’re Stealing From You” by Lynn Tylczak.
Andi Gray is president of Strategy Leaders Inc., StrategyLeaders.com, a business-consulting firm that teaches companies how to double revenue and triple profits in repetitive growth cycles. Have a question for AskAndi? Wondering how Strategy Leaders can help your business thrive? Call or email for a free consultation and diagnostics: 877-238-3535 or AskAndi@StrategyLeaders.com. Check out our library of business advice articles at AskAndi.com.