How to Spot Theft
There are many things you can do to spot employee theft in your business. Have an inquiring mind, ask lots of questions, and never accept answers that don't make sense. Spend time each month monitoring your financial results. Look for inconsistencies, such as inventory declining in a slow sales month or excessive customer returns. Listen to customer complaints about late deliveries or missing items, and don't accept "computer problems as an excuse.
Consider spot-checking your accounting records by reviewing one category each month. For example, you might scan the check register to see just what payments are being made. Look for missing check numbers and ask to see any voided checks. Another month you might review the payroll log or look over the records of returned items. Look for multiple entries of similar items or suspicious customer names.
Finally, watch your employees for changes in behavior or spending that seems to be beyond their means. And beware of an employee who insists on doing all the detail work and never takes a vacation. It could be the sign of someone with something to hide.
How to Prevent Theft
Now let's looks at ways to prevent employee theft. Your first safeguard is an effective system of internal controls. This includes segregation of duties, dual controls, standardized policies and procedures, and a thorough review process. Wherever possible, have two people involved in a process. Don't allow the person who writes checks to also reconcile the bank statement, or the person who writes purchase orders to control the inventory records.
Not all employee theft is financial. Make sure the layout of your facilities doesn't invite theft. Consider segregating valuable inventory in a high security area. Review security around your shipping and receiving areas.
Perhaps the most effective way to prevent theft is to screen employees well before you hire them. And when employees leave, always change computer passwords, and change locks if necessary.
For suggestions on setting up internal controls or a review of your current controls, contact our office.