How to prevent employee theft

Employee Theft

Employee theft – this is something that really annoys me! Hiring and managing staff is stressful enough without having the added stress of staff who you put in a position of trust and they steal from you! When we think about stealing, we naturally think in terms of money. But there’s more to it than that. They can steal stock, business systems, time, clients.

Stealing money and stock are the most obvious and I’ve had two instances recently where that’s happened to my clients. One cafe where a trusted employee was giving away free meals to his friends and family and placing orders for produce and liquor and taking them home. You might be able to forgive the odd time where they’ve given away a free lunch to their mum without asking, but at the end of the day it’s still stealing when there’s no authority to do so. But placing stock orders (one for you … one for me) and walking right out the front door with them, that’s unforgivable!

My client who had the most brazen employee stealing money was a gym. The manager was processing ‘refunds’ through the EFTPOS machine and putting them back to his own account. Of course his greediness got the better of him and the ‘refund’ amounts became higher and higher so that it clearly looked odd to me when reconciling the accounts. Upon further investigation we found hundreds of refunds back to one particular account, and then checking the camera footage (which was right behind the employee, watching everything he did!), the extent of the theft was discovered.

Staff can steal more than just stock and money, and this dishonesty is harder to track and can take longer to discover. One client who is in quite a unique and specialised industry had a high level employee methodically steal their business systems and processes before the final blow of stealing the customer database and starting their own business. And it’s even happened to me – a staff member who I highly trusted approached my biggest client to cut me out and take over the work personally. For me, it wasn’t so much about losing a client because there are plenty of great clients out there and if they have these business ethics, then they’re not the type of clients I want to work with anyway. But I felt a devastating sense of betrayal that my trust had been broken by this employee. And even with all the documentation in place to try and stop this, it can still happen.

Even with the most diligent of systems and processes, sometimes you’ll just come across a bad egg who will steal from you. But there are some simple strategies that you can put in place to try and minimise the chances of it happening. Here are some ideas.

Learn more: Documented systems and why they’re important

Do your due diligence when hiring

This may be one of the most important steps you can take to combat employee theft. Screen all potential employees carefully. Look into employment history, call references, and run a credit check. Above all, trust your instincts. If you sense someone might pose a risk to your business, don’t give them the benefit of the doubt. Hire someone else you feel comfortable with.

Identify and eliminate opportunities for employee theft

Think of any opportunities where staff have unsupervised access to sensitive financial data, cash, or anything of value – then brainstorm how you can minimise the risk. For instance, make sure no employee ever opens or closes the store alone, separating co-workers who are friends, testrict access to financial records and change passwords often.

Conduct ongoing audits

It’s wise to perform random internal audits regularly to spot fraudulent activity early. This is where we come in, and can help identify transactions that may appear suspicious.

Keep a close watch on inventory and supplies

Invest in an automated real time inventory management system. These records should be checked on a regular basis and if you’re constantly turning over your stock but not showing the corresponding income, this is a red flag to be investigated.

Use a smart POS system

Exception-based reporting systems for point of sale transactions are one of the most useful tools to come out in recent years for preventing employee theft. These systems identify potential fraudulent transactions in real time—excessive refunds or voids, for instance—allowing business owners to investigate fraud quickly.

Invest in security measures

It only makes sense that when staff know they’re being watched they’re less likely to steal from you. Key areas for video surveillance include storage space for inventory and supplies, offices where financial data is kept, and at the cash register in-store.

What happens when they’re caught

Our workplace rules are a minefield and it’s difficult to know sometimes what your rights are. Employees who are fired due to serious misconduct, and theft most certainly falls into this category, do not have to be given notice and can be dismissed immediately. However, they are still entitled to their pay for the hours they’ve worked, and any entitlements they’ve accrued. You cannot withhold any final payment in lieu of theft as this is a separate civil matter and should be taken up with the police. (Crazy I know, but those are the rules unfortunately.)

Learn more: Negative feedback or positive opportunity

Final thoughts on reducing employee theft

Although it’s important to do everything you can to eliminate opportunities for staff to steal from you, one of the most effective ways to avoid employee theft is to nurture a positive relationship with your team.

It is much harder to steal from people you know. So take the time to interact with your employees, fostering good will with the people who work for you. A friendly environment where people care about each other creates an atmosphere where criminal behavior is less likely to take place.

One final tip: give your staff a way to safely and anonymously report suspicious employee activity. Your staff are the eyes and ears of your business, but they may not come forward with incriminating information unless they feel safe doing so.