When running a business, preventing theft is always a top priority. So, vaults are purchased, locks are installed, and fences are built. But the threat isn’t always coming from where you might think it is. Surprisingly, some of the people you should be most concerned about may already have keys into the building.
Employee theft should be a major concern for business owners, a bigger concern than some may realize. And since it’s such a big issue, it’s vital that business owners learn the details of employee theft and take the appropriate precautions to prevent it.
Employee theft basics
Just how big of a deal is employee theft? Well, a 2012 study by the Association of Certified Fraud Examiners found that 25 per cent of internal fraud cases result in losses of a million dollars on average.
In fact, employee theft costs Canadian businesses about $1.4 billion every year, according to the Retail Council of Canada, a non-profit that represents more than 45,000 retail stores across Canada.
Employee theft costs Canadian businesses about $1.4 billion every year, according to the Retail Council of Canada.
On average, the Council found, employees steal about $2,500 in cash or goods from their employer before they’re caught, while customers only steal about $175. Normally, the $2,500 isn’t stolen all at once but rather over time. The council also believes there are approximately 566,000 employee thefts that go undetected each year.
So how does all of this dishonest activity within an organization play out? It can take many forms, including cargo theft, forgery, data theft, cyber-related embezzlement, and theft of cash, cheques, business equipment or client property.
Employee dishonesty can lead to cargo theft, forgery, data theft, cyber-related embezzlement, and theft of cash, cheques, business equipment or client property.
How can you prevent employee theft?
Because employee theft is such a widespread issue, it’s important that all business owners, ranging from small businesses to large companies, take the appropriate precautions against it. Here are some tips that may help:
- Establish a pre-employment screening program.
- The program should include reference checks. You may also want to perform criminal and credit checks depending on the position you’re hiring for.
- Create security guidelines.
- The guidelines should outline the company policy for employees who are caught stealing.
- Use human resource programs.
- Develop programs designed to build employee loyalty and align employee and company goals.
- Ensure that company merchandise or property isn’t easy to steal.
- This could include a number of tactics ranging from locking up merchandise to installing a surveillance system.
- Establish controls.
- The controls should be for petty cash disbursements, bank deposits, withdrawals, issuance of cheques, payrolls, reconciliation of bank statements, and payment of invoices.
- Ensure no one employee has control over all parts of a financial transaction.
- Separate responsibilities and functions so more than one employee deals with any given financial transaction, and organize workflow to ensure one employee verifies the work of another.
- Perform regularly scheduled and random inventory checks.
- A program should be implemented to manage these checks.
- Monitor the premises with closed circuit television (CCTV) surveillance.
- Be sure to keep in mind any applicable privacy law requirements with respect to surveillance.
- Check merchandise records.
- All incoming merchandise should be checked against purchase invoices and all outgoing merchandise against shipping documents.
- Being firm is important. But so is being friendly and fair.
- If you treat your employees with respect, they’re far more likely to return the favour.
Want to learn more?
By following these tips, you can start to relax knowing you’ve taken steps to protect your business from employee dishonesty. But sometimes, despite all of your precautions, your efforts just aren’t enough. That’s why the appropriate insurance plan is so important, so that you can ensure you’re covered should the worst happen. Our experts have a wealth of industry expertise – find out how Federated can help you today!
This blog is provided for information only and is not a substitute for professional advice. We make no representations or warranties regarding the accuracy or completeness of the information and will not be responsible for any loss arising out of reliance on the information.