“It is bad enough when an intruder breaks into your factory at night or a robber holds up your store, but when your own staff steals from you, business owners are left dealing both with the loss and the betrayal of trust.”

Internal theft is a potential problem in any business. We are not talking about an employee taking a few pens from office supplies, but of the methodical theft of merchandise and money sometimes thousands and thousands of dollars worth, until the employee is caught.

We all like to think that the majority of employees are honest. In actual fact 60% of stealing reported in New Zealand over the last two years related to employee theft and not shoplifting.

It is a rare occasion when a hidden camera is placed at a business premises that an offender is not identified. In many instances more than one offender is identified. There have been occasions when the shop owner has refused to believe that a long term employee is a thief until they have been caught more than once by a hidden camera.

Similarly an overt camera can ensure other staff dont go down the same track. People quickly forget that the camera is there and recidivist offenders are still likely to get caught.

Here are a few precautions to take to prevent light-fingered staff from stealing from you:
Job functions: Separate purchasing, receiving and accounting rolls to reduce the autonomy in any one job. When two or more people are involved in a particular function, instead of one, they would have to collude to defraud

Purchasing: Centralise the purchasing function. Control purchase orders by pre numbering them [in sequence], and get supporting documentation for each purchase of expense invoice. Use pre numbered cheques, so that all expenditure can be traced in sequence.

Receiving: create and control a set receiving area. Count and weigh all materials and compare the results with the shipping documents. Use pre numbered receiving control forms to record shipments. Assign two people to verify each shipment received.

Shipping: use one employee to a single in order and another to check and pack it to minimise theft opportunities. Seal cartons. Check merchandise as it is loaded. Maintain records of stock movements. Conduct inventories.

Cash control: Close the register after every transaction. Provide receipts. Require verification of voided or under-rings. Conduct surprise cash counts. Rotate staff to different rosters to isolate potential thieves. Have house-rules in regards to dealing with cash and strictly enforce them.

Key control: Never leave office keys hanging on a nail or in a lock. Keep records of key use.

Never rule anyone out: By removing the opportunity you greatly cut the odds of becoming a victim. Staff steal not only because they can get away with it, but because they have a financial need or think they are taking what is owed to them. To spot high-risk employees, look for the following:

  • Employees living beyond the means. Their outside source of income maybe your profit margin.
  • Rule breakers who habitually violate company policy and are unreliable may not be trustworthy to handle merchandise or cash.
  • Substance abusers are usually under financial pressure. They will easily overcome the psychological barriers of the theft.
  • Chronic liars are easily capable of being thieves
  • Immature or troubled employees may come under pressure from peers or find emotional release in antisocial behaviour such as theft. Remember that theft may be occurring in the form of “discounts” being given to peers, or simply a blind eye being turn to thefts by their peers.
  • Employees who feel wronged or hard done by may seek revenge by stealing.

When investigating an internal theft you can never rule anyone out, even long term employees. In fact these are the employees who are more aware than anyone of weaknesses in the security system and the various ways around it.

Some owners are inclined to overlook losses suffered through internal theft, or take it easy on the perpetrator. By not pursuing the incident, especially when losses are high, You set a bad precedent and only encourage more internal theft.

It is disillusioning to find that a trusted employee has taken advantage of you and broken the law. By implementing basic loss prevention techniques, you can hopefully avoid this unpleasant scenario and reduce the chances of becoming a victim of internal theft.

Remember, by not prosecuting the offender and simply showing them to the door you are giving them an easy out and they will seek employment again within the same area. Is your next prospective employee someone else’s theft problem?