13 WAYS TO PREVENT YOUR EMPLOYEES FROM STEALING FROM THE BUSINESS
Many businesses in emerging countries (large and small ) suffer significant losses from theft which can be either internal or external. In recognition of INTERNATIONAL FRAUD AWARENESS WEEK 2023, this article will focus on internal theft, that is, theft by employees.
Common forms of internal theft are :
- Theft from the cash register or from a bank deposit
- Inventory theft for resale
- Office supplies taken for personal use.
- Allowing family and friends to take items without paying.
- Inserting ghost employees on the payroll
- Using the office equipment for personal use without permission
- Taking time from the job to run errands.
- Having breakfast or other meals on the job during working hours
- Using the computer during working hours without permission to attend a virtual class or complete an assignment.
- Using the computer to conduct personal business (ordering goods)
The tips identified below are intended as guidelines for business owners and managers.
1. Division of duties
All job descriptions should allow for the supervision of tasks No one person should be responsible for a transaction from beginning to the end. The person who collects the cash from the customer and prepares the receipts should be different from the person who prepares the paying slip for the bank and different from the accounts clerk who does the bank reconciliation.
- Hire honest employees.
Be sure to carry out background checks before an offer is made to a prospective employee. Very often references are required with a job application, but then the referees are never contacted. There are times when referees do not respond; they may have good reasons for not replying. If the applicant is hired since they look good on paper, that is a big mistake.
- Train your staff
The training of staff on the use of the cash register and the computer is necessary for the efficient operation of the business and for the development of individuals. A part of the training must include letting employees know the consequences of mis – appropriation of funds.
- Monitor your employees’ activities and lifestyles!
The red flags that employees may have a financial situation that could prompt them to steal are often seen long before the act takes place. Employees who frequently need a salary advance, who exhibit a lifestyle that is above their pay cheque ( i.e. drive expensive cars, attend many social events), who show signs of alcohol/drug abuse or gambling, and who are upset when additional supervisory checks are put in place are prime suspects.
If you have good relationships with your employees, then when their back is against the wall financially, they may be more inclined to approach you for assistance rather than steal from the organisation. An alternative is to have an Employee Assistance Program (EAP) as part of the HR Department.
- Conduct surprise checks of the cash register and inventory storeroom or warehouse
Internal audit, if such a department exists, should carry out surprise checks of the cash till, the petty cash container and the inventory storeroom or warehouse. If there is no Internal audit, then management should conduct the exercise. It keeps staff on their toes as they never know when some inspections will be made.
- Establish a physical presence.
Management should manage by ‘walking about’. When management is physically present, the possibility that staff would attempt to steal is significantly reduced.
(7) Use of cameras
The use of video cameras would help to control theft in areas where cash and cheques are easily accessible by general staff.. The cameras, however, must be monitored. Research has also shown that the use of cameras in storerooms and warehouses also serve as a deterrent against stealing.
(8) Review salaries/wages regularly and make them competitive.
If possible, consider rewarding employees for good customer service and increasing sales by wage/salary increases. This may remove the temptation to steal, if the staff realise that their take home pay is comparative with other workers at their level.
(9) Carry out risk assessments strategically and at regular intervals.
Management ought to review the key areas of risk associated with the operation and introduce procedures to plug loopholes The areas of risk in retail organisations are purchasing/procurement, return of goods, and delivery of inventory.
Where meals are sold, there must be some collaboration between the persons who deliver the food and where the payments are made to prevent customers from collecting food without paying.
(10) Mandatory vacations and rotation of staff
An additional method of imposing control in accounting systems is the implementation of mandatory vacations and the rotation of staff to other departments.
Instances of fraud have been exposed when persons who leave late and arrive early are off the premises on vacation. Transferring staff to other locations prevent them from becoming too familiar with the system, so that they can work out ways to short circuit controls.
- Review your computerised systems for cyber security.
Many companies are accepting debit and credit cards in their system on an online platform. Cyber theft is on the increase, so regular upgrades must take place to secure data and procedures. Internal Audit or an IT Consultant must be used to test the system to ensure that theft from the inside is not possible.
- Reconcile the list of staff on the records of HR with the individuals on the weekly or monthly payroll.
Internal Audit or management should verify at least twice a year that every person on the payroll can be identified as being a bona fide employee. This is particularly important if there is a large staff with many part time or temporary workers.
- Operate a hotline so that employees can report theft or fraud committed by their co -workers.
The management should set up a confidential telephone hotline or controlled drop box or email, so that employees can inform management of their suspicions.
As part of staff training, the importance of reducing fraud so that business losses are eliminated, and jobs can be saved should emphasized.
Whistle blowing may not be fully embraced in some locations, but it works well in other cultures.
**Robertine A Chaderton, PhD FCCA is a Certified Fraud Examiner (CFE) who conducts Fraud Training for businesses. She may be contacted at email: drchad@robertinechaderton.com or Tel :869-465-1011/869-662-4230