EMBEZZLEMENT CHECKLIST

Let's hope that none of you have had an employee that has stolen something from you or your company.  It hasn't happened to you? 

All I can say is "WAKE UP!".

Embezzle means to  take for personal use money or property that has been given on trust by others, without their knowledge or permission.

Embezzlers come in many forms, from the accountant with a gambling problem, a staff person that is having a tough time keeping things together at home to the people working on your houses taking materials and tools for their own use.

Here are some of the most common types of embezzlers:

• Stealing Cash. In the simplest situation, cash is received and the employee merely pockets it without making a record of the transaction.  This is rare in our business because most of our transactions are by check.  Make sure your petty cash fund is secure however.
• Check Kiting. Check kiting takes advantage of the time period between deposit of a check and collection of funds. The check kiter steals money from the company and deposits the money in an account. He then writes checks back and forth between two bank accounts, his own and that of the business, each time escalating the amount of the check. This has been made more difficult since the banking commission has moved to digital banking.  An example of this is the email scam of sending you a check for lottery winnings and then having you deposit the check in your account and sending a service fee amount to the scammer.  Everything hits the fan when their check bounces.
• Payroll Fraud. Enterprising embezzler sometimes add relatives or fictitious individuals to the company payroll and thus enjoy several salary checks each week instead of one.   I have personally seen this one at a company I worked for about 25 years ago.  The payroll clerk got away with it for almost a year.
• Fake Loans. Taking out a loan for a business and not telling the owner is a common way for embezzlers to get their hands on cash quickly. When the loan eventually comes due, the embezzler is long gone.
• Purchases. This is a hard one to find. Your bookkeeper sets up a dummy business account and starts invoicing the business for expenses.  They are paid to the "fake" account which is really your bookkeeper and the money is gone.  The more trusted the employee, the more likely this could happen.  I've read recently about accountants and bookkeepers stealing hundreds of thousands of dollars.
• Kickbacks. Purchasing agents can accept kickbacks from suppliers from purchasing goods at inflated prices.  This is another prime target for embezzlers.  Having their buddy add 10% to an invoice and then authorizing payment and splitting the money is very common in our industry.  I've even seen owners do this to get out of paying taxes!
• Bogus Expense Receipts. Salespeople and others can pad their expense reimbursement requests. Alternatively, personal items can be bought and charged to the company.
• Stealing Company Supplies. Employees can make personal use of company tools, supplies and equipment, as well as abusing company credit cards and cell phones using both for personal expenses.

If I were to start looking for an embezzler, I'd start with the Expense reports and then start tracking company tools and materials.  Next would be the kick-back scheme.  And have your bookkeeper audited.  It's just good business practice to audit anyone with their hand on your checkbook.

Is this happening in your company?  I don't know.  But you should!  Take the time to safeguard your business against theft by your employees.  The fact is that customers only account for about 20% of what is actually stolen every year from retail stores, the employees steal the rest!