Insuring Employee Theft
The opportunity to steal often comes from trust.
I trust my employees. No one here would do that." This response is one of the most common given when we discuss Employee Dishonesty Coverage. This came to mind when reading about a loss by a Raleigh law firm. An employee of 25 years has been accused of stealing hundreds of thousands from the company over the last 10 years. This employee had been so active in the community that a non-profit named a part of their building in her honor. Who could be more trustworthy?
Everyone trusts their employees. Why would you hire someone you didn't trust? The fact is that nearly every business experiences some degree of employee theft and the US Chamber of Commerce reports that nearly 1/3 of all business failures result from employee crimes.
Employee theft can be much more complicated than an employee taking cash or property from the office.
Just a few examples are listed below:
- Double Submission/Inflation of Expenses
- Skimming –Unrecorded Sales
- Check Tampering
- Paying Non-Existent Employees/Contractors
- Purchasing goods that do not exist.
The average case is not detected for 18 months, and the median loss was $140,000. Research shows that the crimes are more frequently caused by opportunity than need. Employee Dishonesty coverage can provide you with protection from this type of loss, but the most important step is prevention.
Run background checks on new employees, supervise your employees, conduct audits and look out for the warning signs of fraud. These signs can include never taking vacations (this is when the discrepancies are often found), refusing to let others touch their work, living beyond their means, missing financial records and other unexplained behavior. You should be reviewing the bank statements when they come in and questioning what you see.
The decision to press charges against an employee can be one of the hardest an employer has to make. Good financial controls can prevent it from ever happening.
Sources
afce.com, inc.com, sba.gov