Employee theft is not just about millions of dollars embezzled from corporate giants. It happens in all kinds of businesses, from neighborhood stores to local cafes. And it’s often small, repeated actions that add up over time and significantly impact the bottom line. With their limited resources, small businesses can feel the pinch even more.
Scott, a popular coffee shop owner, dealt with the matter firsthand. Earlier in the year, he noticed a discrepancy in stock. It turned out to be petty theft. Scott terminated the employee and reported the loss to his insurer.
Here are the key steps Scott’s insurer recommended he take to safeguard his business and prevent future losses:
- Require criminal background checks of all new employees. Conducting criminal background checks for all prospective employees establishes a more secure hiring process and serves as a deterrent for individuals with questionable intentions.
- Separate duties so no one employee is responsible for making transactions and handling money. This division of labor acts as a checks-and-balances system, reducing the likelihood of opportunity.
- Develop and communicate fraud prevention policies and disciplinary measures for violations. Outlining preventive measures and disciplinary actions is crucial in setting expectations and maintaining trust.
- Perform routine financial audits. This proactive approach identifies discrepancies promptly and prevents significant losses before they escalate.
- Check stock and equipment regularly. Theft extends beyond monetary transactions. Regular checks will safeguard against inventory shrinkage and ensure valuable assets are accounted for regularly.
- Provide an anonymous means for employees to report suspicious activities. Fostering a culture where employees feel comfortable reporting suspicious activities without fear of reprisal encourages transparency.
As financial professionals, we would also point out that in the event of losses not covered by insurance, Scott may be eligible to deduct the uncovered portion, such as the deductible, for income tax purposes, as long as all other tax requirements are met.
Addressing employee theft is not just a concern for big business; it’s also a practical and urgent matter for the everyday entrepreneur. As Scott protects his coffee shop from employee theft, working closely with an accounting firm like Boris Benic and Associates is crucial. Our expertise will help uphold financial standards and boost the company’s resilience and success over time.
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