Eight Tips to Ward off Employee Theft

Attorney Sonya Smith Valentine

Loss prevention measures to reduce your liability

By Marcia Wade Talbert s Post

Since the beginning of the recession not only has

fraudulent activity increased, but the amount

of money lost to fraud has increased as well.

U.S. businesses lose 7% of annual revenue,

equaling $994 billion, to fraud, but small businesses

are even more vulnerable, according to

a report from the Association of

Certified Fraud Examiners.

Small businesses suffered both

a greater percentage of frauds (38%)

and a higher median loss ($200,000) compared

with companies that have 100 to 10,000 employees

that only suffered losses between

$116,000 and $176,000, according to the report.

Between the recession and loss due to fraud,

small business owners are under even

more pressure to stay profitable

and stay in business. Lawyer, accountant,

and identity theft expert Sonya Smith-Valentine

lays out eight steps that small business owners

should take to keep their assets

safe from in-house thieves.

Keep important items locked up.
Make employees

who have access to sensitive information

lock office doors and file cabinets

at the end of the workday.

Keep the mailbox locked and limit

the keys to the mailbox.

Make sure all computers have

automatic password protection

and instruct users to log off when

they step away from their computers.

Put passwords on your bank accounts

so that only specific people

can order new checks.

Check employee references.

At a minimum, run a civil and criminal background

check on employees, and as your

business grows, hire bonded bookkeepers.

Even get background information

from building management about

cleaning crews that have access to your offices.

If an employee has anything to do with money,

check their credit report to learn about

their debts. "If their credit is really jacked up

and they are really hard-pressed for money,

they might not be the person you want,"

says Smith-Valentine.

Sign your own checks.
If one person is doing

all the bookkeeping they might make payouts

to companies that you haven't

done business with.

They may set up a dummy billing system

to make it seem like you received

a bill for services and they are

just paying the bill.

If you sign checks yourself, you are more

inclined to pay attention to where

the money is going, and employees are

also less likely to embezzle,

says Smith-Valentine.

If the owner isn't available to sign the checks,

then require the signatures

of two different employees on checks.

Separate the responsibilities

of accounts payable employees.

Make sure the person who is paying

the bills (i.e. signing checks) is different

from the person who is logging

the information into the computer.

When you split the two job responsibilities

it becomes harder to manipulate the data,

says Smith-Valentine. Also, don't allow

the data entry employee access

to the mail. This will reduce

the data entry clerk's ability

to steal a check and cover it up.

Perform random audits of vendors

and clients. Let your staff know that

once every six months you will choose

a business that your company does

business with and randomly audit it.

Randomly choose checks from

your bank statements, find out who

the checks were made out to,

and then audit that company.

Consider hiring an outside accounting firm

to do this; it will put the employees

on notice that there are people

other than you watching them.

Encourage employee watchdogs.

a process for employees to

anonymously report abuse and fraud.

Also let them know that they could

be rewarded if information

they provide leads to the arrest of an offender.

Purchase employee dishonesty

insurance coverage.

Taking time to detect fraud and

clean up the aftermath is time

you could be using to run your business.

You can purchase inexpensive

insurance plans to help defer some

of the costs that occur as

a result of fraud or embezzlement.

Encourage employees to take

vacation time. A lot of small business owners

are happy when their employees work

as much as possible. But

the embezzling employee will

never take off time. They come in early,

stay late, and they always want

to discourage you from looking up

information on your own, says Smith-Valentine.

"If something strange is going on,

it is probably going to pop up

while they are gone."


Fraud Awareness Week

Small Business Fraud Prevention

Manual Anti Fraud Resources

Keep Swinging: An Entrepreneur's Story

of Overcoming Adversity and

Achieving Small Business Success

United States Secret Service Field Office

Link here

Sent from Kigali, Rwanda


  1. Your recommendations are appropriate for companies that have the staff and financial resources for implementation. Unfortunately, most small businesses do not. There are a few very simple procedures that are very effective and do not require any special staffing, etc. You might want to review them and list them on your blog.

  2. Dear Ruth..

    Your comments are relevant and I am taking this opportunity to emphasize that I am not that article's author.. Whenever the case may arises, you can scale those recommendations.. Lol, Gbu J-L K