Business Law



Do you think your small business is immune from employee theft?

Think again.

In 2011, Girl Scout troop leader, Christa Utt, embezzle more than $5,000 from the annual sales of Girl Scout cookies. An Oklahoma court found Utt guilty of the embezzlement scheme, which deprived her troop of the funds required to hold the annual holiday party.

If a Girl Scout troop leader has the motivation to steal, so can one or more of your employees.

An Expense You Cannot Afford

Small business owners operate on razor thin profit margins. From restaurants to auto mechanic businesses, even the smallest hits to the income statement can turn a profitable year into one flowing in red ink. Employee theft is an issue most small business owners never want to confront. However, it is often the most trusted employees that pull off embezzlement schemes. Depending on the amount pilfered, employee theft can result in either a misdemeanor or felony charge.

The Two Most Common Employee Theft Warning Signs

Trying to catch employees stealing can become a full-time job. Two warning signs stand out that should reduce the amount of time you spend wringing your hands. Employees that falsify punching in and out have committed the classic case of employee theft. Whether you use a time clock or a sign in/out sheet, you have to monitor employee time cards closely. One of the most common strategies involves having one employee clock in early for another employee that has yet to show up for work. Another common employee embezzlement theme hits cash driven businesses hard. Typically a customer service business issue, cash theft doesn’t require the cunning of a jewel thief. All that an employee has to do is ensure he or she doesn’t leave a paper trail of the cash embezzlement.

Other Warning Signs of Employee Embezzlement

Employees often work together to pull off employee theft schemes, especially in the hospitality industry where cash exchanges hands between customers and employees. The most effective employee embezzlement plans are pulled off by individuals that leave little evidence of their wrongdoings.

Here is the list of other employee embezzlement warning signs:

  • Unexplained changes in your business ledger
  • Business recordkeeping becomes disorganized
  • A sudden decline in profits
  • One or more customers receive unusually large account credits
  • An unexplainable improvement in an employee’s standard of living (Think new car and clothes)
  • Missing financial documents
  • Delayed bank deposits
  • Customers that complain about receiving a bill they have already paid
  • Obviously altered check amounts
  • An employee that always requests to work late or on weekends
  • An increase in the number of past due accounts receivable
  • Duplicate payments
  • A sudden increase of payments made to the same vendor
  • Petty cash fund significantly dwindles or disappears

Small business owners typically notice financial irregularities whenever accounts payable do not correspond to accounts receivable. However, many employee theft schemes fall under the radar of small business operators that have to juggle multiple responsibilities at the same time. You can perform background checks to prevent convicted thiefs from robbing you blind, as well as perform unannounced audits to keep your employees guessing your next move.

The most effective way to prevent employee embezzlement is to hire a licensed business law attorney that has years of experience discovering evidence of employee theft. You need to work with a trained professional that investigates employee embezzlement evidence thoroughly, before making an accusation against one or more of your employees.

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