Employee Embezzlement: What You Need to Know | CPA Baton Rouge

It is imperative to trust those who work for you; after all, you probably hired them and worked with them on a regular basis. Yet a wealth of statistics indicates that worker theft, including embezzlement, is on the rise. According to the latest Global Study on Occupational Fraud and Abuse, 95 percent of all businesses have experienced some form of employee theft.

What industries are most affected? The Association of Certified Fraud Examiners reports that banking and financial services have the highest number of occupational fraud cases. This is followed by manufacturing, government and public administration, healthcare, and retail.

In order to prevent worker theft, it is essential for business owners to implement safeguards and internal controls. By educating yourself and putting processes in place, you can minimize the possibility of this occurring and detect it early on. Here are some tips to help you get started.

Make sure you know who you are hiring.

You cannot select a new employee solely on the basis of his or her resume, recommendation, or personality. A professional background check should be conducted on any employee who will have access to confidential information. Checking references is also a wise idea.

Check for red flags of embezzlement.

Make sure your antenna is up to detect common theft indicators. Employers should pay attention if a staff member suddenly spends beyond their means, is always the first in the building and the last to leave, or is overly protective of their work.

Become familiar with all aspects of your business.

Delegating is a must, but you should also keep track of what is going on in each department or area of responsibility. Employees will learn over time which clients pay in cash, who writes checks, the average daily and weekly deposit amounts, and how much money comes from outside sources. Ensure that each employee maintains detailed logs in your accounting software. An accountant can recommend a program that includes a check and balance system with daily opening and closing reports. In this manner, either you or the accountant will be able to run and analyze these reports.

Shared responsibilities should be delegated.

You should not allow any individual in your office to control the entire financial process. Instead, implement a controlled team approach. In this way, you will be able to identify who recorded which transactions, and you will be able to provide a higher level of accountability.

Organize an outside audit.

You may suffer serious financial damage if you become the victim of embezzlement. This is why it is important to hire a small business CPA to audit your finances for irregularities. It is likely that he or she will be able to keep track of your employees’ work and identify errors, whether they are honest mistakes or intentional.

It is advisable not to inform your staff if the numbers in your business don’t add up, as the suspect may destroy evidence if you notify them. Speak with a trusted CPA first so they can put a theft detection system in place.

The use of an accountant as a neutral, expert third party is a smart defense against employee embezzlement. Contact our firm today to schedule a complimentary initial consultation. It is our goal to assist you in setting up the appropriate systems.