Internal Theft Prevention

Internal theft is a potential problem in any business.  Most employees are honest; however, internal theft is often a major cause for small business failures.  Hereare a few precautions to keep staff from stealing from their employer:

Hiring:  Be sure to check references and to conduct background checks on positions involving a high level of trust.

Job Functions:  Separate the duties of purchasing, receiving and accounting to reduce the ability of one employee to accomplish a theft without the help of another staff member.  When two or more people are involved in a function, they would have to collude to defraud the company.

Purchasing:  Have the purchasing function centralized to better control and supervise it.  Control purchase orders by sequentially pre-numbering them, and require documentation for each expense invoice.  Use pre-numbered checks, so that management can track all expenditures in sequence.

Receiving:  Control access to the receiving area.  Use pre-numbered receiving control forms to record shipments.  Count and weigh all materials to compare with the shipping documents.  Require two people verify each shipment. They will keep each other in check unless they start colluding to defraud the company.  To prevent this, change at least one staff member in that role frequently.

Shipping:  Have one employee assemble an order and another check and pack it to reduce chances for theft and errors.  Seal the shipping cartons.  Keep records of stock movements and do frequent inventories.

Key Control:
  Maintain strict control over who has keys allowing access and conduct an audit of the keys.  Never leave office keys hanging on a nail or in the lock, where they can be “borrowed” and copied.  Be sure to change the locks if keys are lost or possibly copied.

Cash Control:  Cashiers should close the register after every transaction and provide receipts to customers.  Voided or under-rings and all returns should require verification.  Management should conduct surprise cash counts.

Anyone Can Steal:
  To identify high-risk staff members, look for:

  • Employees living beyond their means:  The money must be coming from somewhere—it could be from your business.
  • Disgruntled employees:  Sometimes employees who believe they have been wronged may try to get back at the company for grievances or perceived slights through stealing.
  • Troubled or immature employees: They may find an emotional release in antisocial behaviors such as theft.
  • Drug users:  They can find themselves under financial pressure to maintain their habits.  The company’s assets become attractive to help satisfy this need.
  • Rule breakers:  An employee who frequently violates company policy or rules may not be trustworthy to handle merchandise or cash.

By removing the opportunity, a business has cut the odds of becoming a victim.  Workers steal not just because they think they can get away with it, but because they need money or think they are taking what is owed them.

By setting up basic loss prevention techniques, any business can avoid this and reduce the chances of becoming a victim of internal theft.

Source:  American Crime Prevention Institute