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Employee Theft

The sad truth about todayís workplace is that statistics show that thereís a good chance that your employees are stealing from you. Here are some of the cold, hard, facts.

The giant accounting firm Ernst & Young claim that the rule of thumb for internal losses due to theft amount between 1% and 2% of sales. The U.S. Chamber of Commerce estimates that up to 5% of the net corporate profits are consumed by theft. The Retail Council of Canada estimates that in the year 2000, internal theft accounted for one-third of "inventory shrinkage" in this country. That works out to nearly $1 billion among retailers alone. But companies in all sectors are at risk.

According to the British Columbia Crime Prevention Association 40-50 % of retail business losses are due to employee theft and 60-70 % of corporate business losses are due to employee fraud. Even worse than the loss is the estimate by some business bankruptcy agencies that on average, three out of ten business failures are attributed to internal theft.

Not only do employers and business owners have to deal with the economic impact of employee theft but it certainly betrays any element of trust in an employee-employer relationship when an employee steals from the company.

So what can you do about it?

Donít hire people who will steal from you.
The most important step in protecting yourself is careful screening of the people you hire. You need to know who the people are that you hire. Are they really who they say they are? Reference checks should be mandatory. A quick call to a former employer might prove very useful. And many companies and organizations have instituted a program of criminal records checks for all new hires.

Communicate to Employees
Be clear about your policy regarding employee theft and the consequences. Institute a zero tolerance policy for everyone in the organization when it comes to employee theft. Any deviation from the policy invites repetition or other employees to maybe take a chance. Lead by example and expect your management team to follow it.
You can also communicate to all staff about the direct and indirect costs of employee theft. Encourage communication, reporting suspicious circumstances or persons to someone prepared to do something about it. Educate staff on recognition and response to employee theft.

Protect your vulnerable areas
Limit employee access to sensitive areas where valuable property or equipment is stored. For example it is probably not wise to have employee lockers or change rooms near stockrooms. Eliminate the possibility of temptation and you reduce the risk.
Monitor any area that deals with cash or valuables with a hidden camera. If there are a series of thefts in one area like a warehouse then look at installing a remotely monitored camera. As long as you donít install it in a washroom, a change room, or an area that may be considered an invasion of privacy, then you should be okay legally. Tell the employees up front before you install the equipment. Itís another deterrent that might help you protect your vulnerable areas.

Keep Good Records
Ensure that all of your staff are aware of the proper authorization procedures for purchasing items and paying bills. Have supporting documentation for each transaction. Control purchase orders by pre-numbering them in sequence. Put serial numbers on all debit and credit memos, purchase orders and invoices. The better recording systems that you have, the easier it is to pinpoint problems earlier and limit your losses to a minimum.

Keep track of your budget and your inventory. Get regular reports so that you know whatís happening. If there is a problem then find out why. Do regular and surprise audits. If you balance your books at regular levels then you should be able to at least reduce your losses.

Even after you have taken all of these steps you may still find that you have employee theft. Thatís because some staff need the money for a variety of reasons and some other staff steal because they think that they are owed something else from the employer besides their current pay check.

The bad news is that most security companies believe in the 10-10-80 rule around employee theft. This rule suggests that 10% of your employees wonít steal from you no matter what. 10% will steal from you at any opportunity. And the other 80% can go either way, depending on the risk and the severity of the penalties. You may not be able to deal with the 10% who are born crooks, but you have a great ability to influence the other 90% of your employees by following some of the steps above.


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