Preventing Employee Theft

Preventing Employee Theft bb3 Feb 24, 2011

By Staff writer State Farm™ Employee

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According to a 2009 United States Chamber of Commerce study, a shocking 75 percent of employees steal, or have stolen, from their employers. The same study estimates that nearly a third of all corporate bankruptcies can be attributed to employee theft.

Employee theft can come in many different shapes and sizes; whether itís taking home office supplies, skimming from the registers, insider robberies, or sophisticated bookkeeping and computer fraud, the reality of the modern workplace is that business owners are wise to have controls in place Ė controls that can help minimize and prevent employee theft.

Want to protect your business? Here are a few steps to get you moving in the right direction.

The Safest Bet: Hire Honest People

It might sound obvious, but your best defense against employee theft is to hire honest employees.

Thoroughly screen all job applicants by requiring a detailed application, checking references, and conducting a face-to-face interview. If youíd like to go even further, you can require a criminal background check for all potential employees, and in some states, depending on whether the employee will be handling money, you can require a credit check. Sometimes the requests themselves will cause an undesirable candidate to move on.

Internal Controls

A few simple policy changes and adjustments to your businessís everyday operations could make employee theft much more difficult. Consider the following:

  • Duties such as issuing checks, making deposits, managing inventory, and reconciling accounts should be kept separate. Require a second signature for disbursement checks over $500.
  • Individuals with access to company books or purchasing/paying duties should be monitored. Such employees should be granted only as much access as they require to perform their duties.
  • Rotate tasks among employees whenever possible.
  • Carefully review all journal entries, and be alert to large numbers of unnecessary entries.
  • Consider hiring an outside CPA firm to perform an annual audit.
  • Require employees to use passwords to access computers or networks, and have employees change their passwords on a monthly basis. Employees should log off the computer whenever they leave their desks.
  • Be certain to make backup copies of the accounting records, and store the copies off the premises. If you later think someoneís been changing the books, youíll be able to conduct a thorough comparison.
  • Conduct regular inventory audits of all property.


You trust your employees with your property, but that doesnít mean you canít maintain an added level of control. Hereís how:

  • Consider using a keycard system or a digital PIN system instead of a traditional key and lock. Both grant you more control over who does and does not have access to your business, and both provide more information regarding when and how your property has been accessed.
  • If you use a traditional key and lock system, maintain control over access to building keys. Donít have keys out and available for any employee to use. Keep all spares locked up.
  • Make sure all shop, warehouse, and office keys are the type that cannot be duplicated without the master.
  • Keep an accurate record of those employees who have been assigned keys. It will decrease the likelihood of keys disappearing, but it will also help the police if you ever have a break-in.
  • Change your locks whenever an employee leaves or is dismissed.

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