Embezzlement 101: A Question of When | Jobs In NJ

Embezzlement 101: A Question of When

By: Alison Hinson

"When will one of my employees embezzle money from me?"

This isn't a question many business owners ask themselves, but it should be. Every business has some inherent risk of embezzlement, but some business owners create an environment that actually helps it to happen. The following tips can help reduce the temptation and occurrence of financial theft in your workplace.

Trust Is Not a Control Point

"Hiring trustworthy people means that you don't have to worry about embezzlement, doesn't it?"

The exact opposite is true. The more trust you place in someone, the more you leave the door open for fraud. "They were like a member of my own family" is the phrase you hear from many business owners after the crime is uncovered.

The first safeguard against embezzlement requires a shift in thinking. As hard as it may be, you need to realize that any of your employees have the capacity to steal from you. It doesn't mean that they will, but it means that you are obliged to set up systems to reduce the ease in which it can happen.

Check and Balances

Most small business owners track their expenses using QuickBooks. Did you know it is easy to change the dollar amount of a transaction in QuickBooks to hide evidence of embezzlement? A few quick keystrokes are all it takes.

Anyone with access to QuickBooks can set up a fake vendor and make payments to them for seemingly valid reasons. Your accountant may not uncover these discrepancies in an annual audit because the transactions appear to be correct.

Here are a few simple steps you can take to avoid this:

  • Get to know who your vendors are and why you're paying them.
  • Make sure the monthly bank statements are being sent to your home address - not work.
  • Open the monthly statement and look for odd transactions and amounts.
  • Set up your banking accounts to require two signatures and make sure the bank knows that this is your standard policy.
  • Don't use a signature stamp.

These simple checks and balances can go a long way in preventing the opportunity for embezzlement.

Check for Warning Signs

You can probably spot the warning signs before your money has disappeared. Employees making any of the following comments should be a red flag to you:

  • "You're so busy... why don't you let me handle the banking transactions for you? All I need is your signature stamp."
    Translation: "With your signature stamp, the company checking account is one big piggy bank for me."
  • "I'm too busy to take any time off, even when I'm sick."
    Translation: "If I take time off, you might discover what I've been doing, so I will be here every day."
  • "I know I seem protective of my work, but I want to make sure that no one messes it up."
    Translation: "I don't want you looking at my work, so I'm going to make sure you don't, even if I have to bully you or act incensed that you don't trust me to do my work correctly."

If any of these statements sound familiar, you might have some embezzling going on.

Each business owner should ask themselves when, not if, someone will embezzle. It happens all the time, at all levels of an organization, and by all different types of people. Putting some safeguards in place can save you the time, headache, and emotional turmoil of embezzlement.

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Alison Hinson has over 20 years of experience helping business owners make intelligent decisions with their money. She provides corporate programs to help employees better manage their personal finances. In addition to consulting, she frequently writes, speaks, and creates webinars about various financial topics. Alison is the host of Money Talks, an award-winning radio talk show on WMPG, and co-host with Debi Davis of Mind Your Own Business, a show dedicated to all things small business, on WLOB.