By Ron Kern
Shadow Tracker's Investigative Service
It's bad enough when an intruder breaks into your plant at night or a
robber holds up your store, but when your own staff steal from you,
business owners are left dealing both with the loss and the betrayal of
Internal theft is a potential problem in any business. We're not
talking about an employee lifting 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
The majority of employees, like most of society are honest. Even the
most trusting business owner can't ignore the possibility of internal
theft. Here are a few precautions to take to prevent light-fingered
staff from ripping you off:
Job Functions: Separate purchasing, receiving and
accounting roles 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 you.
Purchasing: Centralize 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 expenditures
can be tracked 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: they will police each other (change at
least one of the people frequently).
Shipping: Use one employee to assemble an order and
another to check and pack it to minimize theft opportunities
(and errors). Seal cartons. Check merchandise as it is
loaded. Maintain records of stock movements. Conduct
frequent inventories.
Cash Control: Close the register after every transaction.
Provide receipts. Require verification of voided or
under-rings. Conduct surprise cash counts.
Key Control: Never leave office keys hanging on a nail or in
the lock, where they can be "borrowed" and duplicated.
Keep records of key use.
By removing the opportunity you've 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're taking
what's owed them. To spot high-risk employees, look for:
Employees living beyond their means: there must be an
outside source of income - it could be company profits.
Rule breakers: an employee who habitually violates company
policy may not be trustworthy to handle merchandise or
Substance abusers: they often have financial pressures, or
they have overcome the psychological barriers of theft.
Chronic liars: experience shows that many liars also steal.
Immature or troubled employees: they may find an emotional
release in antisocial behaviours such as theft.
Wronged employees: they may get back at you for
grievances or perceived slights through stealing.
When investigating an internal theft you can never rule out anyone,
even long time employees. In fact, they may be more aware than
anyone of the weaknesses in the security system and the ways
around it.
Some owners are inclined to overlook losses suffered through
internal theft, or take it easy on the perpetrator - easier, certainly, than
they would if the thief was a stranger. By not pursuing the incident,
especially when losses are high, you set a bad precedent and only
encourage more internal theft.
It's 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.
Written by:
Ronald A. Kern
Shadow Trackers Investigative Services