Small Business Theft (The Internal Threat)

Theft from businesses by employees, not only negatively impact the company’s financial holdings, but, if revealed to the public can drive away customers and potential business partners.  Keep in mind that only a small amount of employees do the stealing (less than 10 percent)

The holidays are when attention to fraud prevention should be at its highest.  It’s the time when people need extra cash to buy presents for friends and family members or for themselves.  And it is also the time when we tend to let our guards and be more trusting.  We overlook the rules put in place to prevent bad things from happening.  You’re warned, don’t do it. Employees are willing to steal merchandise and intellectual property that they can sell for cash or steal cash. 

These are some of the ways that employees steal from your business:

1. Take UPC/Barcode:  This is where they use a barcode from a cheaper product to buy something that is more expensive.  This is when the employee is doing the purchasing and is also ringing up the transaction themselves.

2. Canceled Transaction:  This is when an employee starts to ring up a transaction then cancels it but keeps the cash given to them by the customer.  For example, a customer purchases a pack of cigarettes that cost $9.99 with a $10,00 bill, but instead of waiting for the receipt and his penny after the cashier rings it up he departs.  The cashier then cancels the transaction and pockets the $10.00.

3. Refund:  An employee takes a item from the shelves and process the refund for the item, but instead of taking cash he/she puts the refund on a gift card.  Placing it on a gift card makes it untraceable.

4. Taking it:  Employees can walk out the door with the company’s merchandise or intellectual property if no one is paying attention.

What can you do to combat theft by employees?

1. Know who you’re hiring:  Do background checks.

      2.  Have good procedures:  Provide limited access to resources and have in place a mechanism that lets you know who access a resource at any given time (whether that is the safe, cash register or warehouse, etc.).

     3. Use Cameras:  This allows you to record all activity throughout the day and store the data so that you can go back and review them when an incident does occur.  It also acts as a deterrent when employees knows they are being watched.  These systems are available at reasonable prices.

     4. Use Security Guards:  If practical and you can afford it, you should use security guards.  A physical presence is also a great deterrent.

      5. Computer Security measures:  employ computer security measures that give employees limited access to resources (on a need-to-know basis). Prevent data downloading, etc.

     6. Use employees to police each other:  Encourage employees to look out for theft and fraud in the workplace.  Encourage reporting of such incidents and reward those who come forward with information.  This is an inexpensive and effective method.