How to Keep Your Employees from Sneaking Some Extras
August 1, 2008
Friends of a restaurant worker call in a bogus take-out order for a pepperoni pizza so there will be an “extra” pizza she can take home that night. An accounts payable clerk cuts checks to a fake vendor—in whose name he has opened a bank account that he happily deposits the checks into.
Some workers reach creative heights in defrauding their employers. In turn, employers scramble to implement policies to combat the latest scams.
“There are as many ways to commit fraud as there are people,” says Talon Stringham of Sage Forensic Accounting and treasurer of the Utah chapter of the Association of Certified Fraud Examiners. But companies can reduce employee theft of almost every kind with a few basic measures.
Strong Internal Controls
The most important thing a company can do to keep its cash in its coffers is delegate accounting duties to more than one employee. “The person who has control of the assets shouldn’t have control over how those assets are tracked,” explains Stringham.
In other words, the accountant who cuts the checks should not be the person who signs the checks. Separating out the process makes it much more difficult to cover up fraud.
“The biggest mistake employers make is assuming it won’t happen to them and failing to have in place a strong culture of honesty and implementing internal controls,” says Monica Whalen, president and CEO of The Employers Council.
Even companies with strong internal controls need to be vigilant about oversight.
“Simple things like doing bank reconciliations can go a long way to preventing fraud,” says Stringham.
One way to nip fraud in the bud is to not hire a thief. “Without fail, do reference and background checks,” says Whalen.
In addition to reference checks, companies should verify employment history and education. A lie on a resume speaks volumes about a candidate’s honesty.
“We’ve seen several instances where people have committed fraud, and when you dig back in their history, they’ve done it before,” says Stringham.
Another savvy human resource policy can help uncover fraud: mandatory annual vacations. It takes time and effort to cover up a long-term scam; with the perpetrator on vacation, co-workers may stumble upon red flags that wouldn’t be noticed otherwise.
Additionally, companies should have a written policy that “contains the threat of termination and prosecution to instill a fear of detection,” Whalen says. Workers should be fully aware that theft of any kind will be punished with more than a slap on the wrist.
“If you create a culture where people know they’re going to be prosecuted, it goes a long way to preventing fraud,” agrees Stringham.
An Anti-theft Culture
“In any fraud, there are three elements,” says Stringham, “pressure (or motive), opportunity and the ability to rationalize the fraud.” Companies can work to eliminate opportunities to commit fraud, but they can also impact an employee’s ability to rationalize theft—at least to some extent.
Employees who feel under-appreciated or over-worked have a ready-made excuse to steal. “They may think, ‘I work more than I get paid for. I’ve got it coming to me,’” explains Stringham.
Bottom line: treat your employees fairly if you expect them to treat you honestly.
“Give frequent and sincere recognition for a job well done,” says Whalen. “And offer competitive pay and benefits.” More importantly, get to know your employees well and institute an open door policy so workers feel comfortable coming to you with personal problems or concerns with co-workers.
“If you make people feel good about working there, they’ll be less likely to do something detrimental to the company,” Stringham says.