No employer is immune from the risks associated with employee dishonesty. Employee fraud cost employers over 400 billion in 2016, according to the Association of Certified Fraud Examiners (ACFE).
Small privately held businesses are the most exposed to employee theft, but all firms are at risk. The good news is that insurance exists for employee theft and dishonesty incidents, and fortunately, many victimized companies do have crime insurance to cover such instances.
Employee dishonesty coverage provides
- Loss due to theft by employees
- Money and equipment coverage
- Coverage that can be expanded to include vendors or other third parties
Fraud Prevention Suggestions
- Complete background checks on all employees
- Check references
- Separate bookkeeping duties; split up check writing and deposit responsibilities
- Require two signatures on checks over $250
- Add a third person to reconcile books
- Have an outside firm perform an annual audit
- Hold employee training on policies and procedures
- Install video cameras in warehouses and parking lots
- Review your employee dishonesty coverage annually
Here are some of the potential red flags to watch for in employees
- Not taking vacations
- Being overly protective about their workspace
- Prefers to be unsupervised by working after hours or taking work home
- Unexplained debt
- An unexpected change in behavior
If a loss occurs, you should immediately seek legal advice, which can assist you in evaluating the case and calling in additional experts. You should also check your insurance policy for theft coverage. Every business, large or small, should have some level of coverage.