Keep Your Business Embezzlement-Free In 3 Easy Steps

Running a business has always been associated with risk, but it seems riskier now than it has ever been. Because your everyday duties as a business owner are mostly concerned with profits and growth, it can be easy to forget the other risks that may threaten your company’s success, or even your personal reputation. Characterized by the theft and/or abuse of funds entrusted to company employees, embezzlement is one type of white-collar crime that could quickly put you out of business or possibly land you in jail; despite having had nothing to do with the employees that committed the crime. You must secure business so that embezzlement never happens on your watch. Take the following three steps to prevent embezzlement within your company.

1. Record and document all cash transactions.

The Problem: It is very tempting for entrepreneurs, particularly small business owners, to underspend on transaction security because they trust their employees to do business honestly. However, employees might see the lack of record-keeping as a chance to get away with embezzling. One day, an employee intentionally neglects to write up a record of the sale and keeps the money from the transaction.

Prevention: This type of embezzlement can be prevented by requiring employees to fill out a pre-numbered triplicate cash receipt for each transaction. The number of receipts filled out would then be compared to the product inventory, and the employee would be responsible for any discrepancy between the records.

2. Assign payment processing and customer complaints to different people.

The Problem: If one employee is responsible for receiving payments and handling complaints, he or she could embezzle small amounts from each received payment and fudge the statements to cover their tracks. The problem would be hidden from others because no other employee would be interacting with those customers.

Prevention: Each payment received should be dated and timestamped, both at the time the check arrived in the mail and when the check was processed into company funds. The employee in charge of customer complaints should have access to these timestamped transactions in order to pick up any suspicious delays on the other employee’s end.

3. Audit company relations with suppliers.

The Problem: Employees working as purchasing agents can embezzle funds by over-inflating a supplier’s prices on paper while keeping the amount of money that the supplier didn’t receive.

Prevention: If you suspect that your purchasing agents are lining their pockets, you should hire an outsourced accountant to compare company expenditures with the suppliers’ receipts. This should be done at random, and without the foreknowledge of the purchasing agents, lest they act quickly to cover their tracks.

Many of the risks associated with embezzling can be prevented as long as you provide plenty of oversight and keep thorough records of all company actions. When your employees see that you are going to such great lengths to keep the business honest, they will likely work hard to keep the company in good financial shape to keep themselves free of suspicion.

If your business does come under scrutiny for embezzlement, be sure to work with a credible criminal defence lawyer to make your case.

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