Employee embezzlement: Are you taking steps to prevent theft in your business?

Employee embezzlement and other forms of theft often follow a predictable pattern. First, the employee is faced with significant external pressures such as high gambling debts, mounting medical bills, or substance abuse problems. To relieve this pressure, he or she finds an opportunity to steal from the company, especially if the firm's internal controls are perceived to be weak. From there, it's easy to rationalize fraudulent behavior - "I'll just take some money now, and pay it back later," or "I deserve a raise, but management's stingy, so I'll provide it myself," or "They've got plenty. They'll never miss it."

As a business owner, what can you do to prevent employee embezzlement and theft?

• Screen job applicants thoroughly. Review a potential employee's criminal history, verify education and past employment, and check references. If an applicant is willing to lie on a resume, why should you trust that person with your business assets?
   
• Make your policy crystal clear. Your employees should know that theft of any kind will not be tolerated, and managers should model integrity in their interactions with clients, competitors, and government regulators.
   
• Segregate duties. If one employee takes in cash, someone else should prepare or oversee preparation of the cash deposit, and another should record transactions in the company books. Although such separation of duties may be hard to establish in a small company, creative owners will find ways to prevent such transactions from being concentrated in the hands of a single employee.
   
• Conduct regular audits. Employees should know that their activities are subject to surprise reviews and annual independent audit. They'll be less likely to steal if they know that someone is following after them, checking their work.
   
• Track down customer complaints. If a customer claims that a bill was paid but a credit doesn't show up in the accounting records, an employee might be stealing your business receipts.

Low-cost benefits can boost employee morale

Fringe benefits are important to your employees. Wage levels often don't differ much between companies, so the fringes you offer can be an important factor in hiring and retaining workers.

Major fringe benefits such as health insurance are expensive. But if you're willing to be creative, you can design other attractive benefits at low or no cost. Often these benefits are tax-free to your employees. The exact benefits will depend on the size of your work force and the nature of your business. But here are some ideas to consider.

• Flexible schedules. If the nature of your business allows, offer flexibility in working hours. Canvass senior employees for suggestions on changes. Consider ideas such as closing earlier on summer Fridays to give employees a longer weekend. Make up the time with slightly longer hours on other days.
   
• Personal leave days. Offer one paid leave day every two months for employees to take care of personal business.
   
• Transportation benefits. If you're in a metropolitan area, help your employees solve their commuting problems. Work with your local transit authority to offer free bus passes. Consider offering subsidized parking or even van pools in major urban areas.
   
• Company discounts. Give employees discounts on your own products. Negotiate with other businesses - health club memberships, for example.
   
• Provide employees with a free monthly health newsletter, with updates and tips on health care issues. Many hospitals and charities publish such newsletters as part of their marketing efforts.
   
• Arrange lunchtime seminars on topics such as basic financial planning or health issues. It's not difficult to find professionals willing to speak for no fee as part of their business development.

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