The average embezzler steals $357,650 from their employer. A 2018 survey found that embezzlement costs a business more than money. The study revealed that news of embezzlement undermines customers’ faith in the company. That loss of consumer confidence translates into lost sales. By following four steps, an enterprise can protect itself from embezzlement-related losses.
1- Investigate A New Hire’s Background
A thorough background check is essential if a prospective employee will be handling the firm’s monies or have access to the company’s financial information. HireRight.com reports that 85% of the time, a background search will expose fabrications on a résumé. It is also in a company’s best interest to take the time to follow up with an applicant’s references.
A company must conduct background investigations according to state law. Before drafting a background check policy, a business should consult a legal firm with experience in embezzlement law.
2- Have More Than One Employee Handle Money
Having sole control over their employer’s accounts, cash, and checks makes things easier for an embezzler. Dividing financial duties among multiple employees reduces the risk of embezzlement. For example, restrict one employee to issuing payouts while a second employee receives and records incoming checks.
Having multiple staffers handle the receiving and distribution of funds makes embezzling more challenging. Approving changes to a business account via email increases the risk of an employee stealing company money. Anyone with the authority to consent to alterations to a firm’s accounts should do so in person or over the phone. Avoid giving a single employee the authority to approve online transactions and adopt a two-party online sign-off policy.
3- Protect Your Petty Cash
Petty cash is an easy target for an embezzler. Since a small amount of money is involved, many enterprises are lax about safeguarding discretionary funds. A business should store money for minor expenditures and making change in a locked box. Recording petty cash distributions and requiring three signatories to replenish discretionary funds minimizes the risk of theft.
Hospitality, retail, and other businesses with considerable cash on hand need to make daily bank deposits. The more money there is lying around, the more significant the temptation for dishonest employees. When an enterprise reconciles its bank accounts at least once a month, it is easier to find discrepancies that point to theft. The aspiring embezzler will think twice when their employer keeps a close eye on the money.
4- Insure Your Company’s Funds And Property
As mentioned earlier, when rounded up, the median loss to a business from embezzlement is $358,000. Only about half the companies that fall victim to internal theft recoup any of their losses. Even then, the average recovery amounts to less than 40% of the amount stolen, with some of the money coming from the firm’s Commercial Crime Insurance policy.
Commercial Crime Insurance indemnifies companies against thefts committed by employees and outside contractors. There are many ways a staffer can commit embezzlement, so a commercial crime policy covers the purloining of cash and company property.
- Theft via Debit or Credit Card
- Forgery
- Fraudulent Transfers
A business should only purchase commercial theft insurance through an agent that specializes in commercial crime policies.
