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How to Avoid Employee Theft!

Embezzled Employee

Former worker admits stealing nearly $170,000 from University Plaza Hotel

edited news release from U.S. attorney’s office

2:10 p.m. CST, February 22, 2012

SPRINGFIELD, Mo. — A former employee of University Plaza Hotel and Convention Center in Springfield pleaded guilty in federal court on Wednesday for stealing nearly $170,000 from the hotel. “JM”, 47, of Springfield, waived her right to a grand jury indictment and pleaded guilty before U.S. Magistrate James England to a federal information that charges her with wire fraud. 

Every couple of months, I hear a horror story from a business owner who was ripped off…by one of his employees.  These are sad, sorry tales.  Tales of lies, misplaced trust and broken hearts.  How does it happen?  And how can you keep it from happening at your small shop?   Good questions.  Let’s take a look…

How does it happen?  Here are a few popular ways to rip off the boss…

  • Moonlighting.
  • Pocketing cash tickets.
  • Fudging on time cards.
  • Charging personal items to your credit card.
  • Processing phony payables –  “Pay to the order of Ms. Employee”.
  • Taking office supplies or inventory for personal use.
  • Depositing sales revenues into own account.
  • Fudging on payroll.

Certainly, I could make a longer list.  But that would be too depressing.   The worst rip off method I’ve heard of?  A friend of mine discovered that his bookkeeper was depositing the payroll tax deposit into her personal account.  She stole over $25,000 before she was found out.  But even worse, my friend was liable for the missed payroll taxes…and the late penalties.

Embezzlement is a nasty subject.  Makes you feel dirty even talking about it.  In a small shop it hurts even more than in a large company.  A small shop is like family.  It may even be family!

When you start out in business, you do everything yourself…run for parts, answer the phone, sweep the shop.  All that is in addition to handling the service calls.  As you develop your business, it makes sense to find, hire and train competent people who can do some of the tasks that you’ve been doing yourself.

What a relief it is to hire Beatrice Bookkeeper!  Maybe she has a business degree and lots of experience.  Perhaps she is a lot better with the ‘ten-key’ machine than you are.  Anyway, you are delighted to turn the accounting duties over to her so that you can devote your time to other things.

Each day Beatrice takes on more and more responsibility.  Life gets easier!  She answers the phone and makes the deposits.  And you forget all about the financial side of the business.  You pat yourself on the back for your delegation skills.

Then, the bomb drops.  While leafing through the mail, you notice the quarterly payroll report from your payroll service.  An entry catches your eye, but you have to read it three times before it sinks in…Beatrice’s check reflects wages for a forty-hour workweek.  But she only works twenty hours a week!  Beatrice’s been padding the payroll.  In a panic, you race to the file cabinet, and discover that there are no quarterly reports in the file.  They should be there!  Your stomach knots up, you start to sweat and, flabbergasted, you wonder, “Can this be true?”

Sooner or later, every embezzler is exposed.  Usually, through some out of the ordinary activity, you discover something suspicious.  One fellow told me he noticed a service call only invoice for a good, regular customer.  He called the customer to make sure that there wasn’t a problem.  The customer assured him that the service tech had done a terrific job replacing his faucet.  However, the customer did find it odd that the technician offered 10% off if he paid in cash.  Another contractor uncovered an embezzling problem when his credit card was declined for being overdrawn.  Embarrassed, and confused, the contractor raced back to the office to check the statements…and discovered that he was over his limit with charges that he didn’t make.  Another contractor caught his customer service rep selling service calls to another plumbing company.

Why does an employee steal?

  • He feels you owe it to him.  Or is justifying his bad behavior.
  • He means to pay it back.  Good people get into bad situations.
  • You aren’t paying attention.   An employee who might not rip you off under your scrutiny may take advantage of your inattention.
  • Your employee has a substance abuse problem.  Drugs and drinking can turn a good person into a liar and a cheat.

Now, I am not suggesting that you never delegate responsibility.  Nor would I want you to become paranoid about everyone in your company.  Most folks are hardworking and decent.  They show up for work everyday ready and willing to do a great job.  But every now and then you’ll hire a bad apple.  Or you’ll employ a fairly reliable person faced with difficult circumstances, who will cross the line…and rip you off.

How can you keep it from happening?  These guidelines will help.

  • Maintain the highest personal integrity.  Your personal integrity, as demonstrated by your actions, establishes your company’s culture.
  • Be fair.  Establish a clear and equitable compensation plan that rewards productivity and adherence to behavioral standards.
  • Make sure everyone takes a vacation.   An embezzler is most effective if no one else ever sits in his seat and does his job.  Share his chair once in a while.
  • Open the mail.  Many forms of embezzling will show up in the mail…on the credit card statements, the bank statements, or a letter from a vendor alerting you to a problem.
  • Reconcile the bank statement yourself.  The bank statement reports all the cash that went in and out of your bank account.  This is a critical document!  If you can’t bear the thought of doing the bank account reconciliation, at least thumb through the checks, in full view of the person who will reconcile the account.
  • Read your financials.  It is your money.  It is your job as the owner to keep track of the business.  And your employees will know that you are paying attention.
  • Open the books.   What if everyone at your company knows where the money is?  Do you think one dishonest person would risk trying to pull the wool over everyone else’s eyes?
  • Maintain a drug-free company.   Solicit help from a professional drug testing company and your insurance provider.  Follow through!  Establish a drug-free environment at your company, not just a paper policy.

These guidelines will help you discover an embezzling problem.  But, even better, they will prevent embezzling.  You will feel more comfortable and less vulnerable.  It’s a terrible, violating feeling to be ripped-off.  These tips may keep it from happening to you.

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2016-12-01T14:55:19+00:00