The Right Way to Handle Employee Theft (and How to Prevent It)

Employee theft is more common than you think. Learn how to spot the signs — and deal with the thief.
Using the utmost care during hiring can help deter employee theft. Learn here the right way to handle it in advance. (Photo: chompoo)

From cash flow to customer service, small business owners have a lot on their plates. Instead of trying to micromanage every task, they delegate to their trusted employees. So when an employee steals, it’s a real slap in the face. It’s also bad for business.

Business security specialists estimate that 25 to 40 percent of employees steal from their employers, and businesses with 100 employees or fewer are 28 percent more likely to experience loss from employee fraud.

You can help prevent theft by learning to spot the signs, and keep up morale (and profits) by handling a theft the right way.

Learn the signs

Staying vigilant can help keep sticky fingers out of the pot.

Cash: One things employees commonly steal is cash, according to Brad Crowson, regional manager of the small business assistance organization WESST in Rio Rancho, New Mexico. He cautions small business owners to watch for certain telltale clues.

“Look for deposits not matching the receipts of the business — this is true especially when cash is not being adequately accounted for,” Crowson said. This currency disappearance can happen when an employee charges a customer a false, higher price and pockets the difference, or takes directly from registers and unlocked safes.

Merchandise and supplies: Thieving employees also finger merchandise. “Unexplained losses in inventory, especially important in the restaurant/bar industry, can be a red flag,” said Crowson. “Does it seem like you’re running short on certain items on a regular basis? Do you have staff complaining that they can’t locate inventory that you ordered and received recently?” If so, investigate. Supplies such as pens, toilet paper and other goods that keep the business running behind the scenes can also vanish.

Information: Intangible valuables, like customer details, marketing ideas and other proprietary information are attractive to potential thieves as well.

Payroll and expenses: Employees may falsify information on payroll and timecards to receive more money. If travel reimbursement is involved, employers should watch for false requests.

In general, if suspicions arise, Timothy Dimoff, author and consultant on high-risk workplace issues, advises owners to sit down and talk with the employee. “When you ask them questions, note any reactions — are they guarded? Do they respond with paranoia and get defensive? These could all be indications of theft.”

Deterring theft

One way to deter theft is to use utmost care during hiring, including doing background checks and thorough interviews.

Crowson notes, “Up front, it’s important that business owners establish firm procedures to control the receipt of cash, inventory and other expenses.”

Dimoff points to two practices every small business should have in place. “Have bank information sent to a home address, where people can’t go through it. There should also be a policy that two people, the owner and key manager, have to authorize checks over a certain amount,” he said. “Some simple verification of where cash is going and how it is used will help.”

To avoid litigation, it’s important for small businesses to clearly outline company policy regarding theft.

What to do if you catch a thief

If you think an employee is stealing, take these steps.

Contact a lawyer. A lawyer can provide guidance on how to move forward and help avoid a defamation suit.

Gather evidence. Whether in the form of surveillance footage, witness testimony or electronic documentation, proof of theft needs to be sound.

Decide on firing. Before confronting the employee, decide if you want to fire the person or allow him or her to resign. Either way, follow established company protocol. Pressing charges may also be an option depending on the severity of the crime. (If the business has insurance that covers employee theft, a police report will be needed).

Avoid gossip. Employees will undoubtedly have some idea of the situation and discuss it. To deter drama and establish trust, brief employees with a succinct version of events — avoid inflammatory words and denigrating the culprit. Make it clear the employee violated company policy and suffered the consequences.

Move forward. Use the event as an opportunity to establish policy if you didn’t already have one in place and to re-communicate it if you did. Strong guidelines and procedures coupled with a positive company culture should reduce opportunities and desire to steal.

“While it’s certainly important to continue to maintain a positive work environment,” said Crowson, “your staff should be keenly aware that you are fully engaged in the business and the customers you serve.”

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