A cashier at the checkout in a retail store stealing money by sliding cash into his pocket.
Employee theft is uncomfortable to consider and confront, but is important to prevent for the sake of your business. — Getty Images/ Fertnig

Protecting your business from crime is on your mind if you’re a small business owner. If you’ve only been wary of outside threats like shoplifting and cyberattacks, you might be overlooking potential criminal activity occurring within your company. Employee theft is a serious problem that often goes unnoticed, and the financial damage it causes can be devastating to a small business. In a survey by the National Retail Federation, internal theft cost retailers an average of $1,551.66 per case in 2020.

Types of employee theft

Employee theft can take on many forms. Some of the most common types of employee-related crimes include the following:

  • Theft of merchandise: Occurs when an employee steals a business’s products for personal use or resale.
  • Theft of supplies: Involves taking work supplies without consent. While it might seem like a small infraction to rummage the supply room for pens, staplers, scissors or computer accessories, the cost of stolen supplies can add up.
  • Theft of money: Occurs when an employee steals funds that have been entrusted to them to handle or manage for the business. Examples range from pocketing cash during customer transactions to funneling company funds into a personal bank account.
  • Theft of data: Involves stealing valuable information, such as business plans, client lists, customer contact information, recipes, formulas or banking information.

Background checks are not as expensive as they used to be and can let you know if someone has been charged with a crime.

Baron Christopher Hanson, lead consultant and owner, RedBaronUSA

Prevention strategies

Strategies to prevent theft do not need to be invasive or make employees feel like you do not trust them. Creating systems within your hiring process, policies for how to handle employee theft, and means for employees to anonymously report suspicious activity can all help deter fraudulent activity within your business.

Improve job screening

Thoroughly vet all job candidates by checking references, performing background checks and conducting your own research through online searches. “Background checks are not as expensive as they used to be and can let you know if someone has been charged with a crime,” said Baron Christopher Hanson, lead consultant and owner of consulting and coaching firm RedBaronUSA. It’s important, though, to make sure you’re complying with state and federal laws. Some cases of employee theft are never reported to the police, however, so it’s a good idea to call all references to find out about any past issues or reasons for concern.

Create an anti-theft policy

Work with your attorney to include an anti-theft policy in your employee agreement to make it clear that stealing from your business will not be tolerated. Provide examples of prohibited behaviors and let employees know that they could face serious consequences if they’re caught in violation of the policy. For example, you will immediately terminate the employee, file a police report and potentially seek legal action for restitution for any damages. “When you hand someone that paperwork and they’re a crook, they’re going to get up, not fill out anything and run for their lives,” said Hanson.

Set checks and balances

While employees need a certain level of trust and authority to do their jobs, you can implement checks and balances to help detect (and hopefully deter) fraudulent activity. “For instance, make it mandatory for all new accounts to be reviewed and approved by somebody at a higher level than the person who can create them,” said John Hassard, security consultant and expert witness for Robson Forensic. “Only allow cashiers to do a refund up to a certain limit, and above that [limit] a manager must do it. Assume that every position has the ability to kill your business, so put controls and measures in place to keep that from happening.”

Use video surveillance

Consider installing security cameras to keep a watchful eye on your business. “The employer should be the one to set the camera angles so employees aren’t aware of the blind spots,” said Hanson; however, avoid placing cameras in areas where privacy is expected, such as bathrooms and break rooms. If you use cameras that are paired with a mobile app, you can monitor your business when you’re offsite, and those with motion detection can alert you if someone is inside the premises when the business is closed. “You can sometimes get your insurance premiums reduced if you install a better security system, which can help cover the cost of extra cameras and technology,” said Hanson.

Create an employee tip line

Oftentimes, your best information on fraud in the workplace can come from your employees. “Consider setting up an employee tip hotline where workers can report ethical issues,” said Hassard. Make the hotline anonymous so employees can report issues and concerns without the fear of punishment or retaliation.

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Published January 04, 2022