The following are the 12 Most Effective Ways To Prevent Employee Stealing From Your Business
- Employee stealing of Stocks
- Stealing of cash
- Stealing by Cashiers
- Overstatement of expenses
- Employee stealing of company info
- Stealing of customers/clients
- Diversion of business opportunities
- Stealing through accounts receivable
- Recommended solutions
Employee stealing may be defined as a situation where an employee takes goods or cash out of your business on regular basis without payment.
It i s one thing to be able to start a business. But getting reliable employees to work for you is a different ball game.
Employee stealing occurs mainly in small businesses where internal controls are weak.
It can also occur even when your business processes are computerized.
Consequently, one of the commonest problems you may face in your business is employee stealing from your business.
But first, let us look at the signs by which you can know when an employee is stealing from your business:
- Sudden employee devotion to duty
- Closing late without complaining
- Not asking for overtime pay
- Employee leaving above his income
- Buying of expensive clothes and jewelry
- Resistance to changes
- Unwillingness to take annual vacation
- High desire to buy things
The following are some of the many ways you can prevent employee stealing from your small business:
Prevent employee stealing: Stealing of Stocks
Employee stealing of stocks can occur in many ways, including:
- An employee can give a customer more goods than he actually paid for.
- A storekeeper can recycle some stocks back to suppliers after delivery
- A Storekeeper can decide not to record correctly all the stock items he received from suppliers
- A Store keeper can write off some stocks without your knowledge.
When any of the above occurs, the storekeeper will later find ways to collect cash from the customers for the goods moved out from your business.
One of the ways you can prevent this sort of sharp practices is to make sure that:
- stocks received from suppliers are completely and correctly recorded on your computer system or stock bin cards
- stocks sold are immediately deleted from stock records at the close of every sale.
Therefore, whichever system you choose to use should be such that you can know the balance of each stock item at the end of every sale.
Employee Stealing of Cash
Employee stealing of cash can occur in your small businesses.
Stealing of cash is one of the commonest causes of business failure.
Plus, cash is very tempting and oftentimes very easy to steal.
It is can even occur even where your business processes are computerized.
The following tips should enable you to prevent employee stealing of your cash:
- Use serially numbered sales invoices/slips to make sales
- Reconcile the sales invoices with the cash register receipts.
- This daily reconciliation should be done by you or a trusted senior employee.
- It should not be done by the cashier or sales clerk.
- You can also create another desk where invoices are first recorded.
- Ensure that daily sales are paid straight into your business bank account
- You should prepare bank reconciliation statement monthly to ensure that your cash book and bank accounts are correct
- Your business cheque books, company seal and signature stamps should be kept under lock and key.
Therefore, now that the business world is going digital, you should ensure that you computerize your business processes.
This could help to reduce the incidence of employee stealing of cash.
It is cost-effective and very convenient for you and your customers.
Stealing By Salespersons
Your salespersons can steal your cash in the following ways:
- Use today’s cash sales for himself
- Use tomorrow’s cash sales to balance yesterday’s account account
This method of employee stealing of cash can continue for a long time, if not detected in time.
Beyond that, to prevent employee stealing of cash, you should personally track your sales transactions.
Furthermore, you should install effective internal control systems in your small business.
Most importantly, no matter the size of your business, you should computerize your business processes.
Do not allow smart guys to rip you off.
Overstatement of expenses
Overstatement of expenses is another way employee stealing can occur.
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 helps himself with N5000.
Therefore, to prevent employee stealing, you should:
- Obtain quotations from at least three suppliers
- Compare prices and chose where to buy
- Ensure that you make payment directly to the supplier
- And obtain receipt.
Better still, you can use local purchase order to request for your needs.
Prevent employee Stealing Of Company Info
As you probably know, every trade has trade tricks and secrets.
A dishonest employee can steal your business tricks/secrets and sell them to your competitors.
Employee stealing of business information by is usually done for financial gains.
Employee stealing and selling your business secrets can affect your business in many ways, including:
- Your competitors will know the tricks and secrets you are using in your trade.
- Competitors will improve on what they know about your business
- And use it 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.
Stealing of business opportunities
Employee stealing of business opportunities can occur when an unreliable employee decides to sell your business opportunities to your competitors.
Unfortunately, this practice happens 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 their families
- You do not give promotions
- Or give pay raises to deserving employees.
Therefore, one of the most effective ways to prevent employee stealing of your business opportunities, is to improve on the welfare package of your employees.
Employees Diverting 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 closely monitor your business and the activities of your employees
You need to do this because the business belongs to you. You are on the driver’s seat.
Therefore, the success or failure of your business depends on your actions and inactions.
Stealing Via Accounts Receivable
Still another form of employee stealing is when an accounts clerk intentionally decides to understate the balance in a customer’s account.
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 writes off some amounts from a debtor’s account.
Consequently, the customer pays less than what he owes.
In any of these cases, the dishonest employee gains while you lose.
You should bear in mind 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 stealing by introducing division of labor in your business.
In other words, each employee should carry out specific tasks.
Another trust senior member of staff should go round to monitor and coordinate the activities of your employees.
For example, you should ensure that 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 cross-check 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 should help you to reduce the incidence of employee stealing in your business.
Use of external auditors
Furthermore, you should get external auditors to witness stocktaking in your small business, 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.
Install A Camera
As an additional measure to discourage employee stealing from your business is for you to install a close circuit camera in your shop.
Let your employees know that the camera (even if the camera is not functioning) is recording all their activities.
However, note that supervision does not necessarily mean that you have to continuously look over the shoulders of your employees.
But it does mean checking their work to prevent employee stealing.
In conclusion, therefore, you should use all legit internal control systems to safeguard your business.
Business failure is not anything someone would want to experience. It is better described than experienced.