A risk that comes with running a business is the chance of being a victim of employee theft or embezzlement. The risk is especially higher for small businesses as it is more common for owners to overlook, and not implement, the necessary measures to prevent such occurrences.
There are steps that can be taken to substantially diminish the likelihood of embezzlement, such as the following:
Trust, but verify
Taking heed of Ronald Reagan’s advice to “trust, but verify,” it is important to understand that employee theft can happen to anyone. There are cases that even the seemingly most trustworthy of employees or partners are the first one to steal from the coffers of the company.
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Checks and balances
To make sure that employees, particularly bookkeepers, are not given an opportunity to embezzle, receipts and disbursements should be ran through a checking account. In doing so, manipulation of financial statements can be prevented and reconciliation can be conducted more regularly and punctually.
The duties of setting up a vendor, approving payments, and issuing checks, can also be assigned to separate employees to make sure that there are more than two people involved whenever money leaves the business. Division of labor can be done for other business procedures, as well.
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Review and audit
Periodic and surprise reviews of financial statements and employee records, as well as books and accounts, can help deter employee theft and embezzlement.
I am Steve Sorensen, a CPA and financial advisor from Colorado. With a strong background in business and finance, I have helped clients from both the public and private sectors by providing advices on various money matters, including preventing employee embezzlement, legally lowering taxes, and improving overall financial structure. Visit this blog to learn more.
