12 ways to prevent embezzlement
Atlanta—Nearly half of all ODs may be victims of embezzlement.
Two out of every five small businesses are victims of employee embezzlement, and most of these crimes are perpetrated by employees who had been with the company one to five years, have a college degree, and have access to the company’s accounting records.
Most small businesses aren't prepared to prevent it, says Adam Parker, OD, in Midlothian, VA. Dr. Parker discussed employee embezzlement at SECO 2017.
While most people think of embezzlement as stolen money, the crime includes a much broader spectrum, Dr. Parker says.
Embezzlement can be theft of:
• Time. Skipping time for lunch, personal Internet activities such as Facebook
• Property. Taking frames or even office supplies
• Prescription samples. Taking product samples for personal use
• Workers compensation. Feigning injury
All of these amount to some form of financial embezzlement, and the cost is real.
A 2012 Association of Certified Fraud Examiners report found that the median loss to businesses was $140,000. The actual value of the crime changed based on the occupation of the fraudster, with front-line employees accounting for a $60,000 median loss, while executive fraud was as high as $573,000.
The high-dollar figures often lull small business owners into a false sense of security because small businesses typically operate at small enough budget in which such losses would seem immediately apparent. Embezzlement is not as uncommon as some may think, and small businesses—those with 100 employees or less — have been found to be particularly vulnerable to employee fraud.
Larger organizations typically have countermeasures in place, such as employee training, tip hotlines, and other methods of discouraging, preventing, or catching fraud. This translates into shorter time spans between the start of a scheme and when the employee is caught.
Small businesses don’t have the same resources to put into fraud prevention.