Tips on Tackling Employee Dishonesty

Employee dishonesty that leads to some type of theft or embezzlement, be that of company funds, assets or vital company data, can be a serious threat to your bottom line.

There are ways you can mitigate the risk by sticking to proven hiring principles, and putting in place procedures and safeguards to reduce the likelihood of employee theft. Your strategy should also include securing employee dishonesty insurance coverage, just in case.

Small and mid-sized businesses suffer disproportionate losses from employee dishonesty because they typically have limited resources to devote to detecting fraud or theft, according to the Association of Certified Fraud Examiners. It recommends the following:

Hire wisely вЂ” Conduct pre-employment background checks of job applicants that include the following:

  • Criminal history for crimes involving violence, theft and fraud.
  • Civil history collections, restraining orders or fraud lawsuits.
  • Driver’s license check for numerous or serious violations.
  • Education verification of any degrees the applicant claims.
  • Calling former employers to verify the positions the applicant held, length of employment, and reasons for leaving.

Checks and balances вЂ” No employee should be responsible for both recording and processing transactions. Separate responsibility for these functions.

Control access вЂ” Restrict access to physical and financial assets and information to authorized employees only.

Authorization controls вЂ” Develop policies to determine how financial transactions are initiated, authorized, recorded and reviewed.

Keep staff posted вЂ” Educate employees on your policies and procedures related to fraud, the internal controls you have set in place, as well as your company’s ethics policy and how you will mete out discipline for violations. Have all of your employees sign a form verifying that they have read and understand your policy.

Hold an annual training session on fraud and theft prevention.

Anonymous reporting вЂ” To ensure that your staff can feel protected if they become aware of employee theft or other dishonest behavior, provide for a reporting system for employees, vendors and customers to anonymously report any violations of policies and procedures.

Take reports seriously and investigate thoroughly.

Audits вЂ” You should already be conducting regular audits. But you should also conduct unannounced audits, that give employees no time to cover their tracks if they’ve been stealing.

By conducting audits, you also convey to your staff that you are serious about fraud prevention. Audits can also kill any temptation on the part of an employee to engage in theft by making them uncomfortable about engaging in fraudulent behavior.

Probe reports вЂ” Investigate every incident and report, no matter how small. A thorough and prompt investigation of policy and procedure violations, allegations of fraud, or warning signs of fraud will give you the facts you need to make informed decisions and reduce potential losses.

Analyze bank statements вЂ” Review bank statements prior to passing them to the bookkeeper.

Expense procedures вЂ” Have a strict documentation policy for expense reports and audit the reports prior to payment.

Check inventories вЂ” Conduct physical inventories frequently and reconcile the inventory to sales.

Check rules вЂ” Limit the number of check signatories to a few trusted staff, and keep blank checks in a secure location.

Lock the cash вЂ” Allow a limited number of employees the ability to disburse petty cash. Require a receipt for all petty cash disbursements.

Anti-theft devices вЂ” Buy security and fraud-resistant products such as special cash drawers that limit the ability to pilfer, tamper-resistant bank deposit bags, and clear-view employee bags that allow you to see the contents, to avoid staff slipping company assets into their purses or bags.


Finally, you can consider purchasing employee dishonesty insurance. A typical policy includes:

  • Coverage for a loss involving money, securities and other property committed by the fraudulent act of any employee.
  • Coverage of a client’s property. Your business office package policy may not provide coverage if the theft is of your client’s funds, or if it is by a third party (non-employee).
  • Coverage for workers while working off-premises at a client.
  • Automatic credit-card forgery coverage.
  • Automatic Employee Retirement Income Security Act bond coverage is included on most policies, eliminating the need to maintain a stand-alone ERISA bond.

If you would like to speak with us call Gary Wallach at 914-806-5853 or click here to email or click here to visit our website.

BGES Group’s office, located in Larchmont, NY is a full service insurance agency offering, Property, Liability, Umbrella Liability, Business Auto, Bid & Performance Bonds, Inland Marine, Worker’s Compensation, New York State Disability, Group Health, Life insurance, Personal lines and Identity Theft.

Special Contractor Insurance Programs (NY, NJ, CT) – We we have 60+ insurance companies to market your general liability, umbrella liability, business auto, workers compensation, bid & performance bonds and group health coverages. We help contractors set up proper risk transfer. If you’re a contractor we offer extensive information about insurance markets, coverages, risk transfer, subcontractor screening, ways to lower your insurance costs.

BGES Group are Worker’s Compensation Specialists for the States of New York, New Jersey and Connecticut – Issues we address: 1) Lowering pricing – we have specialty programs that can save you up to 40%; 2) Finding a new company; 3) Replacing policies that are being cancelled or non renewed; 4) Audit disputes; 5) Company creating fictitious payroll at audit time; 6) Lowering high experience modifications factors; 7) Misclassification of payrolls; 8) Lowering or eliminating renewal deposits;  9) Getting coverage when you’ve been without for a few months; 10) Covering multiple states under one policy; 11) Eliminating 10% service or policy fees; 12) Timely issuance of certificates; 13) Always being able to get someone on the phone or by email when you need to.

 If you would like to speak with us call Gary Wallach at 914-806-5853 or click here to email or click here to visit our website.

Company: BGES Group, 216A Larchmont Acres West, Larchmont, NY 10538



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