A series of posts designed to call attention to problem areas which hinder the pursuit of being profitable, and solutions which are hard wired to get back on track to being profitable.
Small Businesses are hardest hit by employee theft. –2015 HISCOX Embezzlement Watchlist
In a comprehensive study of cases filed with the Federal Court System the HISCOX 2015 Embezzlement Watchlist shows the largest percentage of losses are occurring in businesses with fewer than 50 people.
Other Facts from this report:
75% of the total losses were an outright theft of cash and misuse of bank deposits
81% of the cases involving check and credit card fraud were with companies which had fewer than 50 employees
53% of the embezzlement schemes were perpetrated by a member of senior management
78% of the prosecuted were female
$243,447 is the median loss
During my many years in the workforce I have personally worked alongside 10 different people who were later discovered to be embezzling from the company. You would never suspect any of them. Hardworking, family people, these coworkers would show up every day ready to carry out the day’s tasks. People whom I regarded as friends turned out to be the culprits of why other employees could not be fully compensated for their efforts as there simply was not enough profitability to increase pay or benefits.
Aside from working with embezzlers I have personally seen the frequency of embezzlement from my clients.
That $243,447 median loss is not as outlandish as it sounds. It’s pretty close to what I have personally seen. The chronic embezzler most often has found the “weak spot” in the organization and taps on it little by little, year after year.
Many smaller organizations simply do not have the systems, or personnel in place which can detect this behavior and the struggle to “connect the dots” seems greater than the current loss at hand and gets discarded.
There is no magic wand which solves this problem but there are several actions which will take the business owner in the right direction towards closing the door of opportunity. I will offer up 5 simple actions you can take which will help in the pursuit of profitability.
- Hire a Loss Prevention Consultant – While no one knows your business better than you, an LP consultant is trained in the area of setting up a system where your vulnerabilities will be minimized. No one understands this better than a good LP consultant.
- Audit (Something!) – Pick one area, payroll, and payments to vendors, credit card statement, etc. Verify and acknowledge the process you have assigned to others was done correctly. Anyone of these can be a large task, make sure you do it thoroughly. You may not find a sign of theft but you will most likely find mistakes which are costing you money.
- Background Checks – Controversial subject as a background check does not provide a “profile”, but it is a quick and inexpensive way of getting a closer view of the past of the people you are paying to watch your business. How much responsibility do you want to give a person who has had 6 different addresses in 6 months?
- Blind Spots – If your surveillance system has a blind spot, then your employees know where they are. This is where they will go to conduct something they don’t want you see. This is easily fixed and a low cost way of sending a message to all members of the organization that you are committed to cutting down on losses.
- Communicate MORE – Make sure your lines of communication are open and employees feel comfortable speaking with you. Not everyone is a thief who wishes to embezzle from you. There are many employees who wish to show their loyalty and gratitude. Having a free and open line of communication is good way of receiving information about the mental health and well-being of your employees. An honest and loyal employee understands the damage that a dishonest employee can create, and they will want a safe haven where they bring this information to. Remember, most embezzlers need the cooperation of at least one other employee to execute their plan.