To lose money due to a bad investment decision is one thing, but to lose money because a trusted employee embezzled funds from you is like a double whammy. Losing $100,000 due to employee theft may be peanuts to a big corporation, but can mean the very survival of a small business. It can be an accountant pocketing the money, or an assistant writing checks and forging the business owner’s signature. Whatever it is, loss from employee theft — for a small business — can be devastating.
Employee theft in small businesses is prevalent, but hard to detect. A survey done by Auditors Inc. of about 1,000 CPA professionals find that as many as 40% of small businesses have experiencd employee theft in one form or the other. However, only about 2% report the crime. Small businesses are ripe targets of employee theft mainly because of size; they do not have measures and safeguards to protect itself from employee theft.
Ruth S. Crane of Auditors Inc. in Wheaton, Maryland has released a book entitled “Embezzlement 101: How to Embezzle from your Employer and Not Get Caught and How to Detect It.” Crane says following the principles will only take an hour of work per week and will virtually guarantee a small-business owner can catch the fraud within 30 days.
Here are a few examples of how employees are embezzling their small business employers:
- If the small business uses credit cards for everyday purchases, the employee can embezzle the company by using those same credit card for personal credit card purchases. A way to hide the purchase is to use the same vendors normally used by the business. For example, it might be immediately suspicious if the business never buys from Macy’s yet suddenly a charge for it suddenly appears. So the trick of stealing employees is to use the same vendors of the business — e.g. Office Depot — and charge personal purchases on the company card.
- Another approach used by employees who steal from the business is to open a DBA (doing business as) account in the same name as the company they are working on. Instead of depositing customers’ cheques into the company account, the stealing employee deposits it into his/her DBA account.
- The employee can also cut a company’s check payable to his/her personal account, forging the signature of the owner.
There are many more ways employees can steal from a small business. Read the full PDF report