The recent statistics on employee theft is shocking. According to one US source, 75% of employees admit to having stolen at least once from their employer—and employee theft costs a company on average 7% of their annual revenues each year.
With the rise of remote work and digital transactions, employee theft has taken new forms, such as embezzlement through online platforms and data theft. Companies are now facing the challenge of safeguarding both physical and digital assets, making it crucial to adapt security measures accordingly.
As a business owner you may not be aware of the many ways employees can steal from you. Some common methods include:
- redirecting company checks to personal accounts and altering entries to cover up the theft
- undercounting change to customers and keeping the balance
- seeking reimbursement for non-business related expenses or
- pocketing inventory or supplies.
As a small business owner, you may not have the big security budget of a large company, but you can combat employee theft with these simple strategies.
Do your due diligence when hiring
This may be one of the most important steps you can take to combat employee theft. Screen all potential employees carefully. Look into employment history, call references, and run a credit check. Above all, trust your instincts. If you sense someone might pose a risk to your business, don’t give them the benefit of the doubt. Hire someone else you feel comfortable with.
In addition to traditional background checks, consider using social media screening tools to get a fuller picture of a candidate’s behavior and ethics. New AI-driven tools are also being utilized by companies to analyze patterns in applicant data, helping to identify potential risks before hiring.
Identify and eliminate opportunities to steal
Think of any opportunities where staff have unsupervised access to sensitive financial data, cash, or anything of value – then brainstorm how you can minimize the risk. For instance, make sure no employee ever opens or closes the store alone, separating co-workers who are friends. Restrict access to financial records and change your secure company passwords often.
With many businesses now relying on digital tools, it’s essential to implement cybersecurity measures such as multi-factor authentication (MFA) and regular software updates. Monitoring employee access to sensitive data through automated systems can also reduce the chances of internal theft.
Conduct ongoing audits
In addition to having an annual third-party audit, it’s wise to perform random internal audits every few months to spot fraudulent activity early. Your bookkeeper or accountant can help you maintain accurate numbers and flag transactions that appear suspicious.
Advances in AI and machine learning have made it possible to automate audit processes, allowing for real-time tracking of financial anomalies. These technologies can help small businesses conduct more frequent and accurate internal audits without adding significant overhead costs.
Keep a close watch on inventory and supplies
Invest in an automated real time inventory management system. It’s a good idea to hire an independent party to check your records on a regular basis, too, to catch any discrepancies in your physical inventory and recorded data.
The latest inventory management systems now integrate with AI-driven analytics, which can predict inventory discrepancies and flag potential theft before it becomes a significant issue. These systems can also sync with POS systems to provide a holistic view of your inventory and sales data.
Use a smart POS system
Exception-based reporting systems for point of sale transactions are one of the most useful tools to come out in recent years for preventing employee theft. These systems identify potential fraudulent transactions in real time—excessive refunds or voids, for instance—allowing business owners to investigate fraud quickly.
Modern POS systems are now equipped with AI-based fraud detection that not only flags suspicious transactions but also learns from past incidents to improve future detection. Additionally, cloud-based POS systems offer enhanced security features and remote monitoring capabilities.
Invest in security measures
It only makes sense that when staff know they’re being watched they’re less likely to steal from you. Key areas for video surveillance include storage space for inventory and supplies, offices where financial data is kept, and at the cash desk in-store.
Today’s security measures include smart cameras with facial recognition and real-time alerts, which can notify you immediately of suspicious activity. Additionally, biometric access controls are increasingly being used to secure sensitive areas, ensuring that only authorized personnel can enter.
Final thoughts
Although it’s important to do everything you can to eliminate opportunities for staff to steal from you, one of the most effective ways to avoid employee theft is to nurture a positive relationship with your team.
It is much harder to steal from people you know. So take the time to interact with your employees, fostering good will with the people who work for you. A friendly environment where people care about each other creates an atmosphere where criminal behavior is less likely to take place.
One final tip: give your staff a way to safely and anonymously report suspicious employee activity. Your staff are the eyes and ears of your business, but they may not come forward with incriminating information unless they feel safe doing so.
With the rise of remote work, maintaining a positive relationship with your team requires new strategies. Regular virtual check-ins, team-building activities, and transparent communication can help foster trust and reduce the temptation for dishonest behavior. Additionally, offering mental health support and resources can improve overall employee well-being, further decreasing the risk of theft.
One final tip: Give your staff a way to safely and anonymously report suspicious employee activity. Your staff are the eyes and ears of your business, but they may not come forward with incriminating information unless they feel safe doing so.
Updated Information: Many companies are now using digital whistleblower platforms that allow employees to report suspicious activity anonymously and securely. These platforms often include encryption and secure messaging features, ensuring that reports are handled confidentially and promptly.
