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To whet your appetite, here are a few strategies from our Virtual CFO team.


Preventing Employee Theft

There are many reasons small businesses are such easy pickings for dishonest employees. Lack of standard procedures, poor organization, stressful operations and unwarranted trust in key people all contribute to the high rate of loss many small businesses suffer from the acts of their own employees.

There are a few practical steps you can take to prevent employee theft.

Bullet 1 Set a standard of integrity. Insist on integrity in every area of your business. If you will refuse to fudge numbers, fib to vendors or do anything else that suggests lack of integrity, your employees will be far more likely to follow your example. At a minimum, your example will make it much harder for the borderline dishonest employee to rationalize dishonest acts.

Bullet 2 Good accounting records are your first line of defense. You should get monthly financial statements and read and understand them. Have your accountant explain every number on both the balance sheet and income statement. Have your accountant show you the source of each number and how the accountant knows the number is right. Keep asking questions until you understand the statements.

Bullet 3 If something in your financial statements doesn't make sense, ask questions until it does. If you don't understand the explanations given by your staff, ask your accountant to review the matter and explain it to you.

Bullet 4 Don't have your bookkeeper or anyone in your accounting department sign checks. Personally signing checks requires time, but it also is a great way to give you control over the entire operations.

Bullet 5 If your bookkeeper signs checks or has access to a signature stamp, you should have bank statements sent directly to you or your accountant. You should do the reconciliation or at least open the statement and review all of the cancelled checks.

Bullet 6 Be vigilant. You can still be trusting without being naive. If anything looks funny or doesn't smell right, ask questions until you understand the answers.

It isn't possible to completely protect yourself against employee dishonesty, but these six steps will go a long way toward preventing employee theft.