15 Tips On How To Prevent Employee Stealing And Frauds In Your Business


15 Tips On How To Prevent Employee Stealing And Frauds In Your Business

There are many ways employee theft and fraud can occur in your business.

Fortunately, there are also many ways you can know when employee stealing and fraud is taking place in your business.

Knowing when employee theft and fraud are taking place in your business can help you to work out ways of dealing with the problem.

So let us now look at the following scenarios:

Sudden employee devotion to duty

Sudden employee devotion to duty without complaining is one of the ways you can know when employee stealing and fraud is taking place in your business.

When you observe that an employee occupying the a sensitive position begins to be unduly dedicated to duty, you can reassign or deploy him to another section of your business.

However, you must make sure that you are what you have suspected is right.

In doing this, you need to make sure that you are not moving a hard working employee to where he will not be productive.

Furthermore, you must make sure that you are not killing the employee’s ambition of gaining promotion to a higher position.

Closing work late

Another sign that employee stealing and fraud is taking place in your business is when you see an employee closing late everyday.

When stealing and fraud are being committed, the employee does not ask for overtime pay for working extra hours.

Moreover, he does not complain that he is being over worked.

Often times, he  will not join in any workers’ strike.

Additionally, he will try to resist a transfer or a change by management.

Furthermore, even when you offer to promote and transfer to another department, he will feel reluctant to obey.

When you observe these signs, you should redeploy the employee to another department.

As a way out, you can make compulsory that all employees must leave the premises at the same time.

Employee leaving above his income

You should watch out for employees who leave above their incomes.

Some of the employees will not stop at anything to buy expensive clothes and jewelry.

They usually have high desire to buy things, especially trending materials.

You can know when an employee is leaving above his income because you know how much salary you are paying him.

,Furthermore, some fraudulent employees do not like to take their annual leave.

This is because, they fear that if they go and another employee is posted to cover his schedule, his fraudulent activities  might be exposed.

Therefore, when you observe the above tendencies in your employees, you should:

  • Move your employees frequently between the various departments of your business.
  • Prepare annual leave roaster for employees to take their annual leave
  • Make sure that no employee should stay in one position for too long.
  • Can install a CCTV camera in strategies locations, even if the camera is not functioning.
  • Create a dressing room where all employees will need to check out every day

Employee stealing: Stocks

Employee stealing of stocks is very common. And it can occur in many ways, including:

  • An employee can issue a customer more goods than he actually paid for.
  • He can pass goods out from your shop using a friend.
  • A storekeeper can recycle some stocks back to suppliers after they have been delivered to your shop.
  • He can fraudulently decide not to record correctly all the stock items he received from suppliers
  • A Store keeper can write off some stocks as damages without your knowledge or approval.

Some of  the ways you can prevent employee stealing and fraud is for you to:

  • Ensure that shipments from your suppliers are properly counted and witnessed by another senior employee.
  • Make sure that items received from suppliers are completely and correctly recorded on your computer system or stock bin cards.
  • Verify all entries in your stock records.
  • Ensure that stocks records are updated after every transaction.
  • Get a trusted staff to check all out going goods to ensure that only goods actually paid for leave your shop.

Most importantly, any system you chose to use to track your stocks, must be such that can show the balance of each stock item after every transaction.

Employee stealing: Cash

Employee stealing and frauds involving cash can occur in your business.

In fact, cases of stolen cash are on the increase.

This is happening because cash is very tempting and, oftentimes, very easy to steal.

Fast guys can manipulate and beat your cash security systems to steal your cash.

The following tips can enable you to prevent employee stealing of your cash:

  • Use serially numbered sales invoices.
  • Use cash register
  • Reconcile the sales invoices with the cash register receipts on daily basis.
  • This daily reconciliation should be done by you or a trusted senior employee.
  • It should not be done by the cashier.
  • You can also create another desk where invoices are first recorded before the customer pays money to the cashier.
  • Ensure that daily sales are paid straight into your business bank account.
  • Your business cheque books, company seal and signature should be kept under lock and key.
  • Only authorized employee should have access to the records.

You should not be satisfied using analog systems to run your business. Go digital.

Computer based processes are cost-effective, efficient and very convenient for you and your customers.

Stealing by salespersons

Your salespersons can steal your cash in the following ways:

  • Sales people can sell your products without accounting for the money.
  • They can use today’s cash to balance yesterday’s account.

This method of employee stealing of cash can continue for a long time, if not detected in time.

Consequently, to prevent employee stealing of cash, you should personally track your cash.

To enable you to monitor your cash, you can install effective internal control systems over cash.

Thereafter, you should get your employees to take a tour of the systems so that they can be familiar be familiar with the internal controls.

This way, they will not have any problem following the rules and regulations.

Let your employees know that you are on top of your game.

Employee stealing: Overstatement of expenses

Overstatement of expenses is another way employee stealing can occur in your business.

For example, a dishonest driver can purchase an automobile part for say N10,000 and tell the seller to give him  a receipt for N15,000! He will then help himself with N5,000!

Therefore, to prevent employee theft and fraud, you should:

  • Obtain quotations from at least three suppliers before you make a purchase.
  • This will enable you to have an idea of the price of average price of what you want to buy
  • Use Local Purchase Order.
  • Compare prices before you chose which supplier to purchase from.
  • Ensure that you make payment directly to the supplier
  • And obtain receipts for all payments made by you to suppliers.
  • Better still, you can transfer money electronically to your suppliers.

Most importantly, remember that modern employees are very smart. So you need to be smarter to beat them.

Employee Stealing Of Company Info

As you probably know, every trade has its own tricks and secrets.

A dishonest employee can steal your business tricks/secrets and sell them to your competitors.

Employee stealing of business information is usually done for financial gains.

Stealing and selling of your business secrets can affect your business in many ways, including:

  • Your competitors will know the tricks and secrets you are using in your business.
  • Competitors will improve on what they know about you to kick you out of business.

Therefore, you should ensure that only trusted employees have access to sensitive info/documents. It is said that the secret of success is secret.

Employee Stealing: business opportunities

Employee stealing of business opportunities can occur when an unreliable employee decides to divert your business opportunities to your competitors for financial gains.

Oftentimes, this unwholesome practice occurs mostly when:

  • You do not treat your employees well.
  • Or you are not paying them what they are worth.
  • Delay their salaries which they need to support themselves and their families.
  • You do not give promotions and pay raises to deserving employees.
  • You do not allow your employees to to take annual vacations.

Therefore, one of the most effective ways to prevent employee stealing of your business opportunities, is to improve on the welfare packages for your employees.

Employee stealing: divert Customers/Clients

Another form of employee stealing is when an unreliable employee decides to divert your customers to your competitor for financial rewards.

To reduces the chances of this occurring in your business, you need to know your employees in great details.

Furthermore, you must monitor the activities of your employees ensuring that you assign sensitive positions to trusted employees.

Most importantly, remember that you are the owner of the business. And so you are on the driver’s seat.

Therefore, the success or failure of your business depends on the choices and decisions you make.

Stealing Via Accounts Receivable

Still another form of employee stealing is when an accounts clerk intentionally decides to understate the balance in an accounts receivable.

In other words, he will not debit the customer’s account with the actual value of the goods supplied to the customer.

Thereafter, the accounts clerk will collect the difference from the customer and convert it to his personal use.

Yet another way you can lose money is when an accounts clerk fraudulently writes off some amounts from a debtor’s account without your knowledge or approval.

Consequently, the customer will now benefit unduly by paying less than what he owes.

In any of these cases, the dishonest employee gains while you lose.

That an accounts clerk has worked for you for many years does not mean that he cannot steal your cash, if he has the opportunity to do so.

Similarly, that an accounts clerk is your relative does not mean that he cannot steal your cash, if he has the opportunity to do so.

Therefore, you should not take anything and everything for granted.

Periodic Stock Counts

Periodic stock count is another effective way you can prevent employees stealing of stocks from your business.

When your employee knows that you are watchful over your stocks and cash, he will not want to steal from your business.

To help you prevent employee stealing you should put a warning on the notice board that any employee caught stealing from your shop will be prosecuted

Division of labor

You can prevent employee theft and frauds by introducing division of labor in your business.

In other words, each employee should carry out a specific task.

A trusted senior member of staff should go round to monitor the activities  of your employees.

For example, one employee should not:

  • Place order for goods,
  • Receive the supplies,
  • Record them in the computer system or bin cards,
  • Make sales
  • Collect cash
  • and bank the cash.

You should, therefore, create a system of checks and balances.

That is to say, your employees should be able to crosscheck the work of other employees.

Furthermore, you can create a system where employees can report the misdeeds of a dishonest staff.

For this system to work fine, you should be able to hide the identity of the reporting employee.

This  can help you to reduce the incidence of employee stealing in your business.

Use of external auditors

Furthermore, you should be able to carry out unscheduled audit checks in all departments of your business.

Beyond that, you can also use external auditors to witness periodic stock counts.

Stock counts can be done, say two times in a year.

The mere thought of external auditors coming to witness stock counts is enough to discourage employee stealing from your business.

Related:10 Reasons Why You need To Hire An Accountant For Your Business

Install A Camera

Another additional measure to discourage employee stealing from your business is for you to install a close circuit television camera in your shop.

Let your employees know that the camera (even if the camera is not functioning) is recording all their activities.

Furthermore, you should closely supervise your employees.

However, note that close supervision does not necessarily mean that you have to continually look over the shoulders of your employees.

But it does mean checking their work to prevent employee stealing.

In conclusion, therefore, you should use  internal control systems to safeguard the assets of your business.

Business failure is not any entrepreneur will to experience. It is better described than experienced.


By Samuel Ijenhi,

B. Sc. Accounting (University of Benin),

Benin City, Nigeria.

Founder: Ijenhi Business Solutions




About Samuel Ijenhi

A graduate in Accounting, University of Benin, Benin City, Edo State, Nigeria.
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