Many small business owners discover too late that preventing theft and fraud is a vital part of running a business. It is estimated that nearly a third of business failures in the U.S. are the result of employee theft or fraud. The hiring, management and oversight of employees offers many opportunities to prevent and respond to employee theft before it sinks your business. If you have been the victim of employee theft or have questions about your legal rights contact your LegalShield provider law firm.
- Establish hiring practices for your business. Always contact references and check employment history. Ask for an explanation of any large gaps in employment history. You may also consider performing background checks on applicants who will have access to financial data, cash or merchandise. The laws regarding your ability to reject an applicant based solely on criminal history vary from state to state. It is important to consult your LegalShield provider to learn about the laws where you do business. Once you establish hiring practices, it is important to follow them for all new hires.
- Avoid nepotism and hiring employees with close personal relationships. Valuable employees help monitor coworkers for potential theft, but when they are family or friends, loyalty to the business may become secondary. You should also carefully consider the risk of hiring your own family. A family member may feel entitled to additional benefits or perks. If you do hire family or friends monitor them as you would any other employee and never let theft or fraud go unchecked.
- Supervise all staff and managers. In many cases of employee theft it is not the newest employee who steals, but rather the long time employee or manager who was unsupervised. Every employee in your company should be supervised. Create an open workplace where every employee feels comfortable communicating concerns or making suggestions. Some employees who steal justify their actions by saying that management is unfair, pay is too low or that managers or owners take advantage of the company so they feel entitled to do the same. In an open and well-supervised environment you may be able to head off these issues before they evolve into theft.
- Beware of the warning signs. While motivations for employee theft may vary, there are some common warning signs. Keep an eye on employees that frequently volunteer to work outside of normal business hours and do not take vacation. This may seem like a positive attribute, but it may mean the employee wants to be unsupervised to facilitate theft. Beware employees who resist procedural changes or avoid oversight of their work. Drug and alcohol abuse, gambling and high levels of consumer debt are also warning signs to monitor.
- Develop multi-level checks and balances. No one employee should have total control or oversight of any area of your business. This is particularly important for accounting and merchandising. Consider having separate employees manage payments and ordering. If your company has large inventory or complex finances you should hire an outside firm to provide auditing or inventory services on a yearly basis. You may also want to perform unscheduled audits to prevent employees responsible for theft from covering their tracks.
- Follow up on your suspicions in a reasonable and professional manner. Failing to follow up on suspicions is asking for trouble; however,you should never make inflammatory accusations or threats against employees. Do not accuse an employee until you have fully investigated the matter. Making threats or false accusations could ultimately lead to legal action against you and your business. If you do identify an employee responsible for theft follow your HR procedures for termination. Contact your LegalShield provider law firm to learn more about setting guidelines that follow state laws regarding termination as well as your legal options for recovering stolen property.
