3 Best Practices to Prevent Employee Theft

It’s a growing problem, so why won’t small businesses report it?

Look around your business and consider these statistics from the U.S. Chamber of Commerce: Three out of four employees will probably steal something from their workplace this year, and employee theft is the cause of 33% of all bankruptcies.[1] Still, while 64% of small businesses report that they have experienced employee theft, only 16% of those reported the incident to police, according to a study from the University of Cincinnati.[2]

The reasons for not reporting the thefts range from emotional to practical, but Jay Kennedy, the doctoral student who conducted the research, identified four core themes:

  • The owner decides that the theft isn’t big enough to warrant investing his or her time in pursuing the matter beyond just firing the employee.
  • The owner’s attorney advises against going after the employee because the financial costs and time commitment of pursuing a successful prosecution will likely outweigh any benefits the employer might receive.
  • The owner has an emotional or family tie to the employee.
  • The owner doesn’t think the police or criminal justice system will be interested in pursuing the case.

Unfortunately, sweeping the problem under the rug as quickly as possible won’t solve the problem. Here are three things you can do today to help shore up any leaks in your operations before employee theft drains your coffers.

  1. Establish a written zero-tolerance policy that clearly states that any employee — including managers — who violates it will be fired immediately.
  2. Do background checks, including credit checks, on all new hires. And check references to get a clear picture of previous work history.
  3. Tighten up financial and inventory controls, including these: restrict access to cash and checkbooks, divide financial responsibilities among a few key employees, check all receipts and invoices against inventory, and make frequent deposits to prevent accumulating too much cash.

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Important Legal Disclosures and Information

  1. http://www.statisticbrain.com/employee-theft-statistics/

  2. http://www.uc.edu/news/nr.aspx?id=19231

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