5 Ways To Limit Employee Theft

If you looked at employee theft as a criminal enterprise, it’s big business. U.S. businesses lose more than $50 billion to employee dishonesty on an annual basis. That’s more than the gross domestic product of Iceland and El Salvador combined. The occurrence of employee theft is widespread, with 75% of employees admitting to stealing from their employer at least once. The Association of Certified Fraud Examiners found that small business owners (those with less than 100 employees) saw the highest median loss at $150,000.

While those numbers are alarming, it’s useful to consider that a common category of employee theft is time theft, where an employee takes payment for hours they didn’t work. However, a few fraudulently reported hours or long lunch breaks don’t account for 30% of all company bankruptcies, which is the number of employee-caused business failures as reported by the Better Business Bureau.

Let’s examine some common ways that employees steal from corporations.

Removing goods or products without paying for them is an obvious and common form of theft. It could be as simple as consuming food intended for customers, or as complex as hiding the removal of medicines from a hospital pharmacy and reselling the drugs on the street. Inventory theft varies from business to business, but at its simplest, it is represented by a discrepancy between the amount of inventory your business produces or buys, and the amount of product or service that you sell.

If you’ve heard it said that data is valuable, it shouldn’t surprise you to learn that employees will steal it. It could be customer information with the intent to commit identity fraud or to offer the data for some other personal gain. This type of corporate theft is a significant issue on two levels: it can cost your business on a day-to-day level, and it can open you up to substantial liability.

Often referred to as corporate espionage, this type of theft occurs when an employee takes proprietary information. It could be source code, design plans for a product, or other trade secrets. Most often, the intent is to sell or transfer the intellectual property to a competitor.

Stealing a service happens when an employee receives a service and neglects to pay for it. Although many businesses offer discounts to employees or may even offer certain services free of charge, the issue occurs when employees take advantage of the system and use the capacity intended for paying customers.

Payroll theft is a classic form of embezzlement due to the centralized power and trust placed with employees who handle payroll. Without proper controls and accountability, it’s relatively straightforward to write a fraudulent check and cash it. Ideally, you should split the responsibilities between two or more people.

At the root, people stealing from their employers is human nature, and no system is good enough to change that. However, with suitable systems, your company can do a lot to mitigate the risks internal theft has on your business. A robust security system should be just as capable of catching employee theft as it is intruder theft.

Background checks can help identify if a candidate has a criminal record, but you can look for other indicators, such as credit reports or thoroughly questioning references and prior employers. It’s critical that you establish special procedures so that once you’ve caught a thief, you can quickly and legally prevent them from causing additional damage. This may include changing passwords, re-keying locks, and having security escort the person from the premises. You should also be prepared to notify law enforcement and preserve evidence for the purposes of legal action.

By demonstrating the proper procedures for handling inventory, payments, and performing services, you make it clear what proper behavior looks like and what the consequences for theft are. People are more likely to follow the expectations you set, plus you reduce the risk of hearing excuses such as “I was never taught the right way.”

Inventory and equipment control systems are just a good business practice period. Goods and equipment need to move through your business in predictable ways, and when they don’t, a good system will help flag problems quickly. The advent of barcodes and RFID tags makes this process easier and more accurate.

Casual theft occurs when a visitor to your place of business spies an opportunity and takes it. It doesn’t have to be premeditated, just the wrong person at the right place at the right time. Setting up a digital video surveillance camera network and visitor access control will help you eliminate those opportunities for theft.

Put another way, you need to “inspect what you expect.” Hiring a certified fraud examiner is a good place to start. You don’t need to suspect fraud before you perform an audit. If your employees know that regular audits happen, they’ll think twice before attempting to steal from your corporation.

The very first cash register was designed to prevent employees from stealing money — a problem retail businesses still face to this day. It had the added benefit of making it harder for thieves to grab the cash without making a fuss. In essence, your security system should be designed to give everyone peace of mind, even if that means protecting employees from some of their worst impulses as well as the intentions of hardened corporate thieves.

i.e.Smart Systems is a Houston, TX based technology integration partner that specializes in design and installation of audio/visual technology and structured cabling. For more than three decades, our team of in-house experts has partnered with business owners, architectural firms, general contractors, construction managers, real estate developers, and designers in the Houston market, to deliver reliable, scalable solutions that align with their unique goals.