Is There a Thief In Your Business? Read this before You Say NO!

A friend called my colleague to demand to know why his bill was 90 days past due. The bookkeeper found a copy of the cancelled check with the dates, etc.

When my colleague called to offer to fax the check, his friend was surprised and apologized. That evening his friend returned to his office, went through his bookkeeper’s desk and discovered she was stealing his money.

95% of your employees may be stealing from you!
In a blind survey, Kessler International research has shown that 95% of employees admit stealing from their employers. Hiscox, an international insurance company, reported that in 2016 US Businesses loss an average of $1.13 million in 2016 to their own employees. Small businesses were hit the hardest with the median loss of $289,864. Association of Fraud Examiners estimates that 7% of all business revenues are embezzled each year.
So, what do you do about it? Here are the top four ways that employees and vendors steal from you and what you can do about it. (From my new book, The Ugly Truth about Cash: 50 Ways Employees and Vendors Steal from You and what you Can Do about It.) I will cover two this week and two next week.

1. Change your financial statement report totals.
Very few business owners put their financial statement report expenses into a spread sheet to make sure they add up. They trust them.
Here’s how to steal: The individual expenses don’t add to the total expenses shown on your financial statement. For example, vehicle expenses: subcategories usually include gasoline, repairs, maintenance, tolls & parking. Each subcategory has an expense amount. When you add the subtotal expenses they are more than the total vehicle expense shown on the statement. The difference is stolen.
How do they get away with it? It’s easy to create journal entries to change the numbers on your financial statements because journal entries never appear on your financial statements. Decrease the expense. Decrease the cash. Or, create a business checking account with a legitimate sounding name and write checks to that account. Or, if you have petty cash and don’t reconcile it, that is an easy way for the embezzler to steal. Remember this is only a few hundred dollars taken from many different accounts over a year’s time period. The busy business owner who doesn’t pay attention never catches it.
Keep the honest people honest by entering your expenses stated on your P&L into an Excel spread sheet. You don’t have to do it every month. You should do it a few times a year.

2. Give Out Bonus Checks
Many companies give employees bonuses based on company profitability. They give the bonus after the Christmas holidays because they don’t want employees to think that it is a “Christmas Bonus” and should be expected, even in years where company profitability was not good.
Here’s how to steal: For one company, this year the bonuses were large because the company was very profitable. They had a company meeting where we handed out the checks.
Unbeknownst to the owner, one of the employees was so thrilled with the amount of his check that he bragged to all of his friends about it. How did he brag? He took a picture of it and put it on Facebook!
And yes, the picture showed the check amount, account number and bank routing number clearly visible on the picture.
He got a call from our banker who questioned some large withdrawals from the company’s bank account to a unusual location. The owner told him that they didn’t authorize any withdrawals. The banker immediately shut down their accounts. The theft was caught in time before too much damage was done.
Then they investigated and found out about the check on Facebook.
The owner told the employees what happened. They didn’t say who did it.
Next year, bonus checks will be direct deposited into employees ‘ checking accounts so that this cannot happen again.
Consider direct deposit for your payroll checks. When you use direct deposit, employees get a notice of their gross wages and deductions. They see that a certain amount was put in their checking account. Employees cannot see the company’s checking account and bank routing numbers.
If direct deposit is not an option, have a separate payroll account where you just keep enough money in it to fund payroll each payroll period. Then, if an employee puts a picture of his payroll check on Facebook, the hackers can get little or no money.
Next week I will cover two more ways people steal from you.