Prevent Internal Theft

At least 5% of your Profit is being stolen every day!

Definitions:

* Theft – the action of stealing; taking something without permission
* Fraud – wrongful or criminal deception intended to result in financial or personal gain

Both these crimes are based on a violation of trust, and the more that you trust someone, the more you should have your guard up. Many cases have involved family members, people who have known each other since childhood, or even the best man at your wedding; there are no boundaries.

The American Association of Certified Fraud Examiners estimates that the typical business will lose an average of 6% of revenues to employee thieving money and goods; worse still, small businesses suffer disproportionate losses because of the limited resources they have to devote to detecting these crimes.

Disbursements – Ninety percent of money theft occurs in fraud around money leaving the company in the form of unauthorized checks, electronic funds transfers and debit transactions. Employees are not as likely to steal cash receipts, but it’s easy to write a check to yourself, submit your personal credit card statement to the corporation or commit fraud on an expense report.

Stock theft is also very common, and is often misconstrued as theft by customers.

Time theft is the final consideration. When employees take work time to check their personal e-mail, text with friend, go on Facebook, Twitter or other social media platforms, or just simply take unauthorized breaks, they are stealing time since they are not doing the job they are being paid to do. According to the FBI, this type of theft costs all U.S. companies a combined $500 billion annually. Add to that other types of theft such as using company equipment for personal use and the problem adds up to big costs for companies.

Studies show that perpetrators of workplace crimes do so because they are either under pressure, feel under-appreciated, or perceive that management behavior is unethical or unfair, and rationalise their behavior based on the fact that they feel they are owed something, or deserve it. Consequently, these crimes are occurring more often as a spouses loose jobs, there is a threat of home foreclosure, or a struggle to pay bills. And once someone has a reason to feel unsafe, the next step is figuring out how to exploit the system to fulfill that need.

4 Keys to Prevent Internal Theft

There are many ways that employees can unlawfully enrich themselves, so have controls, policies and procedures in place to minimise the losses.

Implement Internal Controls

Internal controls are measures that ensure the effectiveness and efficiencies of operations, compliance with laws and regulations, safeguarding of assets, and accurate financial reporting. These policies and procedures should address the following points.

  • Separation of duties: No employee should be responsible for both recording and processing a transaction, or ordering and accepting goods.
  • Access controls: Access to physical and financial assets and information, as well as accounting systems, should be restricted to authorized employees, with authorisations being varied from time-to-time
  • Authorization controls: Develop and implement policies to determine how financial transactions are initiated, authorized, recorded, and reviewed.

 

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Have Clear Rules

Make it clear that you will press criminal charges and pursue every civil course for restitution. Fraud has put companies out of businesses. Employees need to understand that everyone has a stake in making sure that the company continues and that one unethical person can jeopardize that.

No task should be the sole responsibility of any one employee to such an extent that they don’t take leave or the job is not performed in their absence…. Mandatory scheduled leave, with alternative staff performing all the duties is a great way to prevent and uncover any untoward activities.
Job swapping is an impediment to temptation, and keeps any possible wrongdoers uncomfortable enough that they may stop or leave the company.

 

Have Transparent Premises

This doesn’t mean that all the walls are see-through, but work towards making your office, shop and warehouse environments temptation free. Some examples include:

  • Providing Lockers so that staff bags and backpacks are not brought near to stock
  • Squashing all boxes and having clear garbage removal time-tables and processes, using clear bags where possible
  • Limiting the amount of cash allowed to accumulate in the cash register
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Perform Regular (and Irregular) Audits

Every company should have regular assessments; but random, unannounced financial audits and fraud assessments can help identify new vulnerabilities, and measure the effectiveness of existing controls. In very small companies, the best way to do this is to have regular ob cross training and job swaps. A helpful strategy is to always watch out for:

  • Staff not taking vacations – many violations are discovered while the perpetrator is on vacation
  • Staff who are being overly-protective or exclusive about their workspace or prefer to work after hours or take work home
  • Financial records sometimes disappearing
  • Unexplained company bills and debts
  • Unexpected change in a staff member’s behaviors and attitudes

 

I am a very firm believer in trusting staff, creating the right company culture to ensure that trust is upheld and honoured by all staff is critical to minimising staff crime.

What Theft Prevention strategies have worked for you?

 

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2016-12-20T13:08:52+00:00