4 Ways to Proactively Protect Your Business from Employee Theft.

Losses may occur from inside a business just as easily as from the outside.

A major source of loss for many businesses is their employees. The more trust an employer places in a given employee, the more vulnerable that employer is to employee-related loss if that employee is dishonest. To protect itself from untrustworthy employees, a business may need to purchase crime coverage.

A company's exposure to theft from employees lies with workers responsible for handling money (and similar property) and those who have significant access to company inventory. Therefore, a company that wants to evaluate its possible expense for purchasing crime insurance and determine what control measures it should create to minimize theft losses must properly classify its employees.

Identifying Positions of Potential Vulnerability

Employees in positions of greater trust (such as supervisors, managers and executives) usually have greater access to company assets. These workers are more expensive to insure because they can potentially create greater theft losses. These employees are often in a position to handle money and securities and typically manage company records concerning monetary transactions. They are also, frequently, in charge of benefit plans or have other fiduciary responsibilities.

Other employees, with non-managerial duties, can also cause problems. Consider persons, such as those in sales, product transportation and/or warehousing and supplies, who have constant access to valuable company property. Because dishonest employees at this level deal with tangible items rather than money and securities, they represent a less dangerous source of loss. However, depending upon the property involved, they may also create substantial losses. Still, such employees are less expensive to insure.

A business that evaluates its need for insurance coverage and anti-theft controls must make thorough proactive theft mitigation techniques for their type of business. Consider the following 4 ways your business and team can proactively engage in theft protection.

1. Perform Regular Audits

Audits can't fully eliminate theft; they can certainly help minimize the financial loss associated with employee theft. Further, they may also assist in the quicker discovery of losses and aid in identification of dishonest employees. Audits are important for not only detecting theft, but for preventing it in the first place. An active and regular auditing procedure can help to dissuade dishonest employees from committing the theft due to the higher risk of being caught during an audit.

2. Perform Background Checks

One essential method is to check new employees thoroughly. The hiring process must include adequate references that are verified and running pre-employment background checks. Hiring workers with criminal backgrounds is a near guarantee that losses will soon occur. Such losses may not be covered, since insurance companies usually exclude losses involving employees with a documented criminal history.

3. Rotate Job Responsibilities

Another proactive measure is to assign theft vulnerable job duties among different employees. Responsibilities for making deposits should not be assigned to the same employees responsible for making account payments. The worker who orders inventory should be different from a worker responsible for receiving property. These workers should be different from the worker who pays for shipments. In small businesses with few employees, such tasks can be rotated among different workers. This reduces the chance for a dishonest employee to create theft opportunities. Employees will act as checks and balances against dishonest activity. There is still the chance that workers will cooperate with each other to steal property, but collusion is significantly less common than individual acts.

4. Create a System of Checks and Balances

Other important controls involve having proper procedures for handling company check disbursements (such as the use of countersignatures and stamping incoming checks "for deposit only"), monitoring electronic payment processes and inventory controls that include accurate record keeping (either manual or computerized) to track inventory levels. It also helps to closely monitor ordering procedures, acceptance of credit, and separate approval of suppliers. Another way to exert control over possible thefts is to use qualified, independent auditors regularly. Outside auditing can quickly and accurately identify problems. Implementing auditing recommendations is also a smart idea.

Regardless of the type of business, it is critical to recognize that, unfortunately, employees can be a major contributor to business losses. An insurance professional is a good source of expertise for identifying ways to protect against internal losses. Contact our team today to learn more about how you can protest your business.