How Small Businesses Can Prevent Employee Theft
Employee theft results in an estimated $40 billion in losses annually and is increasing by 15% each year, according to research conducted by the U.S. Chamber of Commerce.
In fact, workplace-related theft is now considered a major risk to large and small business entities alike, with average losses of nearly $500,000.
Following are some tips to help you prevent and protect your small business against employee theft:
- Establish Written Procedures
Every business should have a written policy regarding the proper way to report suspected theft and a clear, concise plan of action to investigate all claims. Make sure that all employees are given a copy when hired. Take time to review job descriptions and separate high-risk functions. For example, require one person to enter payment activity and another to reconcile accounts. It’s a simple way to discourage dishonesty by implementing a check-and-balance system.
- Prevention Is the Best Policy
Perform pre-employment screening and background checks and then implement security features and verification checkpoints to discourage dishonest behavior. High-risk industries may find installation of surveillance or other equipment cost-effective compared with loss ratios, while low-tech options like periodic audits may be sufficient for others. Experts agree that prevention really is the best policy, especially when it comes to finding the perfect fit for your company. High-risk employees or those with a track record of prior problems can put your entire financial future at risk. Unfortunately, most small-business owners wait until a loss has already taken place before seeking relief. Instead, carefully screen employees and implement a zero-tolerance policy for those with a history of theft or dishonesty.
- Purchase Employee Theft Policy
Small-business owners are often surprised to learn that their traditional property insurance doesn’t cover the cost of losses related to employee theft or dishonesty. Whether it’s embezzlement or the literal theft of physical assets, misconduct and dishonest behavior by employees can result in significant loss for small-business owners. It’s possible to purchase an employee theft policy that protects against these unexpected losses either “upon discovery” or on a “per theft basis.” Speak with your agent to determine which form meets the needs of your small business.
- Follow Up
Depending upon the type of policy, company organization, type of claim and other specifics, it is important to comply with all legal mandates when a suspected loss has taken place. For example, it may be necessary to involve law enforcement or other authorities when employee misconduct is evident; however, civil and criminal outcomes may vary dramatically. It’s important for small-business owners to take proper corrective action without impinging upon the rights of the employee or other involved parties. Ask your agent what type of proof is required to file a formal claim, how the loss is quantified and what type of evidence is needed to facilitate the case.
Be sure to keep complete records to expedite the process, and notify your agent and the authorities as soon as possible.