Worst case scenario: you trust an employee with access to your company’s money and they steal enough to put you out of business.

As you probably know already, embezzlement can have a devastating impact on a company. While corporate crimes like these should be handled by accounting professionals and law enforcement, the prevention of these crimes absolutely starts with you.

As the owner/operator/person in charge, it’s important to understand what can cause an employee to embezzle, and how to spot it when it happens.

The Signs of Employee Embezzlement

It’s easy to say “when money goes missing”, but the reality is that embezzlement is often perpetrated by the most trusted, long term employees. Furthermore, it can be difficult to take a series of seemingly unconnected events and determine they have a root cause.

Unfortunately, small to midsize businesses, the companies we work with, are the most at risk. According to the 2017 Hiscox Embezzlement Study, more than half of all embezzlement happens at small businesses. These are environments where you may directly work with or know the perpetrator. Given that a quarter of these crimes last longer than 5 years, it seems that simply knowing someone and being hands-on with the day-to-day operations isn’t enough to spot embezzlement.

However, there are signs. They may seem obvious, but keep in mind that many of these are issues small businesses may be dealing with anyway. So, you may not associate them with any potential crimes.

  • Duplicate Expenses
    • Who doesn’t waste a little money? In the chaotic madness that is growing a company, some weird decisions and small mistakes get made. When these happen, make sure they aren’t continuously happening, and get corrected when they do.
  • Disorganized Finances
    • Bookkeeping is difficult, especially when the person in charge of accounting may be a one-man/woman-show. Ledgers that jump around, spreadsheets with weird recursions, sprawling receipts, and lack of short term budgeting and control can all mask financial crime.
  • Suspicious Signatures
    • You have a lot on your plate. You don’t remember signing everything you sign. And when you do, it’s often an illegible scrawl. But *this* signature is off. It doesn’t look like yours at all.
  • Changes in an Employee’s Standard of Living
    • You know what this means, but it may not be as obvious as someone on 45 a year coming to work in their private helicopter. While it’s uncomfortable to dig into someone’s personal life, you do know how much they make. Ask yourself whether a castle full of cars and a yard full of yachts is expected of an administrative assistant.
  • Unusual Account Expenditures
    • Let’s say we work for a housing contractor and I’m in charge of a worksite. Does this building need 3 toilets? Order 5. That’s 2 toilets worth of money I get to keep. Jackpot. Keep in mind, embezzlers often work with clients to justify imaginary expenses, so keep an eye out for clients who always have increased spending and overages.
  • Strange Drop in Profits
    • This happens when you make less than expected per product or job you perform. Many times, companies forget certain aspects of a job when first establishing their pricing model, but this could also due to theft. If you begin to see jobs consistently return less than you expected, take a closer look at where the money’s going.
  • Information from Your Other Employees
    • “This isn’t right.” Trust your employees when they say that. Take the time to investigate on your own.

These are just a few possible signs of embezzlement. Keep an eye out for our next crime in the workplace article, where we’ll go over what causes someone to embezzle and how you can prevent that from happening.