Thursday, July 4, 2013
Is Your Business Being Harmed by Employee Theft?
One of the most devastating discoveries a business owner can make is that one or more trusted employees are stealing from them. It is a betrayal both emotionally and professionally, as well as being financially harmful and potentially crushing to the company’s well being. Employee theft is the reason for up to one third of all bankruptcy filings by businesses.
An additional statistic that may shock you is that it is estimated that $50 million is stolen on an annual basis by employees. Furthermore, up to 75% of all employees admit that they have stolen from their employer on one or more occasions. Hard to believe, I know! But the numbers are real and you need to put safeguards in place to protect yourself, even if you are certain that your employees could never do that to you. It only takes one dishonest person to place your business in financial jeopardy.
Here are a few ways to minimize the risk of employee theft without alienating your staff with a distrustful approach:
1. Itemized receipts should be required for expenses like lodging or meals. Not only should you have these for your tax records, itemized receipts allow you to be sure you are paying for your employee’s legitimate expenses and not meals or lodging for someone else.
2. Ask employees to list who they took out to lunch or dinner or for other entertainment. Again, this is important information to have for tax reasons in case the IRS wants to verify the legitimacy of the expenses. Also, you can ensure that your employees are spending on the clients you want them to. You probably won’t ever need to verify with the client, but it gives you the information necessary in case you do.
3. Make sure that you have policies in place with respect to what is reasonable for expenses. If receipts come in which exceed what is reasonable that would be a flag to explore the situation further.
4. Have employees who drive, add the address of the location where they begin their driving as well as the addresses of additional stops and their final destination on any mileage reports they submit. This gives an idea of where they have been as well as how they are utilizing their time. This simple addition can provide you with a way of identifying who may be spending time on personal errands rather than doing the work they are being paid for.
These are just a few simple ideas for tightening controls a little without angering your employees. Call us if you would like additional assistance with internal controls for minimizing your risk or if you are concerned that an employee may be stealing from you. We can help. 916-576-7050.