Employee Theft

Employee theft is a reality that impacts a variety of business. Employee theft is also one of the most difficult types of theft to detect because the perpetrator is an insider familiar with the stores procedures.

Why Employee Theft Occurs

Unfortunately individuals can be motivated to steal for a variety of reasons.

• Access to money/securities: All employees that handle money, bank transactions or stock receiving/shipping.
• Need for money: While we all need money to pay bills, those with excessive debt due to addictions like gambling, drugs, alcohol or even shopping may have pressures to pay bills that they cannot afford.
• Little fear of getting caught: Employees feel that it is easy to steal and very unlikely that they will get caught if no one is checking.
  An employee, who has access to your money and a strong need for extra cash combined with little fear of getting caught, will steal from you.

An employee, who has access to your money and a strong need for extra cash combined with little fear of getting caught, will steal from you.

Controls

• Ensure that there are always two different employees that enter receivables and make payments.
• Never allow one person to handle all money transactions without someone else checking transactions regularly and auditing annually.
• Require two signatures on all cheques (don’t pre-sign cheques when you are away).

Online Banking

More companies are using online banking systems to pay bills. Payable customers are set up with the bank so that the company accountant can make bill payments on-line. Unfortunately, it has been discovered that some systems allow anyone with an access code to add additional payable customers/accounts and make payments and transfers. This means that the accountant or even one partner could make unauthorized payments or transfers out of the company accounts.

New bank systems and some payroll systems now utilize a 10 digit access code for all authorized employees along with a digit key fob that changes codes every few minutes. The system has pre-set thresholds in place to restrict the accountant and/or a single partner from setting new accounts or making payments above the threshold without confirmation from one of the other authorized persons.

Payroll Systems

Ensure that similar controls and restrictions are in place for your payroll system so that an employee cannot set up fictitious employees in your system.

There have been cases when non-existent employees have been added to the system with pay cheques paid automatically to a bank account belonging to the bookkeeper.

Check your payroll records regularly to confirm that the information is correct. If you do not know all your staff, have your supervisors or managers check the list as well.

For more information on strategies to reduce employee theft, please contact one of our risk management professionals. While risk management strategies can reduce your chances for loss, in the event of a loss it is important to ensure your business has the right level of insurance coverage. Visit our Commercial Insurance page to learn how we can help protect your business.