Many general managers hire people who sometimes seem to meet all academic and professional requirements that are needed to occupy a certain position within the organization.
However, a few months later, it is discovered that these people have committed dishonest acts that represent large economic losses for the company.
Many people think that frauds committed by employees are only due to economic reasons. However, this it is not so.
The reasons can be very diverse: family problems, addictions, incommensurate ambition, resentment toward the company or taking advantage of an opportunity. None of these are excuses for an individual to commit a crime.
Some experts dare to state, even, that businesses lose more due to theft committed by employees themselves, than due to the amount of robberies and assaults committed by outsiders.
Alarm signals
Many business owners who have been victims of embezzlement are surprised to discover that, often, employees who appeared loyal and trusted were the ones responsible for the fraud, and that, as the old saying goes, “you shouldn’t judge a book by its cover”.
It is important for general managers to be observant because sometimes the behavior of people gives them away. They are, if you will, alarm signals that need to be addressed immediately. Therefore, it is necessary to be aware when an employee:
- Is often visited by debt collectors.
- Constantly talks about economic problems.
- Dresses or leads a lifestyle that is not commensurate with their salary.
- Is constantly asking to borrow money.
- Purchases in a compulsive manner.
- He does not want to take any breaks from work.
- He appears uncomfortable with questions about procedures.
- Talks about his constant visits to casinos.
- Comes in and gets out of the company with large bags.
Similarly, there are situations that suggest a possible dishonest action by any employee. Said situations are the following:
- Frequent shortages or an excessive increase in inventory items.
- Business patterns that change when an employee is on vacation or absent.
- Complaints by customers of errors in monthly account balances.
- Constant appearance of damaged boxes or cans that are then deposited in the trash.
- Emergence of items for sale in inappropriate places.
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Actions to avoid being a victim of fraud from your own staff
It is recommended that general managers or owners of a company implement measures in order to avoid being victims of a malfeasance such as:
- Keep separate responsibilities: No employee should control a financial transaction from beginning to end. You need to keep duties separated to make it more difficult to conceal a possible fraud.
- Retrieve bank statements personally: The owner or general manager of the company should prevent someone else from removing or receiving bank statements and other documents such as canceled checks, as this can destroy or remove evidence of embezzlement.
- Monitor the company’s issuance of checks: The manager should focus especially on the checks that are issued on behalf of unknown individuals or companies, signatures that appear to be fake and places where names do not correspond to records. To do this, keep checks locked up, with a numbering system to establish controls and, above all, don’t ever sign blank checks.
- Keep track of accounts receivable: The owner or responsible for a company should assign more than one employee to count and verify incoming checks and whether they are properly endorsed. You must use a stamp that says “for deposit only”.
- Understanding your company’s finances: CEOs should not depend on and rely solely on the accountant. It’s important to be familiar with the accounting system and record keeping of your company. To do this, you could take a training course.
- Do not neglect the security of your accounting software: It’s important not hook up the computer containing accounting records to the network. Furthermore, both computers and software should be password-protected, and the password should be changed periodically.
- Conduct surprise audits: It’s necessary that, at least once a year, an external entity is hired to conduct an unscheduled audit to review the company’s accounting records.
- Having the human resources department as an ally: It’s important for the human resources department to check work references when it comes to select and recruit new members of the staff. In addition, they should recommend objectively whether a candidate should be hired or not without being influenced by the views of the general manager who, in turn, shall establish, in conjunction with this department, policies and sanctions to be applied to the employees who engage in dishonest situations.
Preventing theft and embezzlement depends not only on controls and coercive methods. Some other practices that can reduce these problems are:
- Maintain the morale of employees through a fair and generous treatment.
- Offer competitive wages relative to the labor market.
- Strive to get to know each employee and taking their suggestions into account.
Related content
Read Jason Hanold’s “How to Enhance Your Company’s Growth through Human Capital”