Employee theft, fraud and embezzlement can cause serious financial and reputation damage to your company. Implement several safety measures to prevent employee theft and protect your business.
Review Your Hiring Practices
Start with honest employees, and you can reduce your theft risk. Consider implementing the following pre-employment checks for all employees, particularly those who work with finances, confidential data or inventory.
- Criminal history of theft, fraud or violence.
- Civil history of fraud, collections or restraining orders.
- Driver’s license report of serious or numerous violations.
- Education verification of degrees and certifications from accredited institutions.
- Employment verification of positions, length, performance, reasons for leaving, and eligibility for rehire.
Utilize Internal Controls
Prepare for the possibility of theft with policies and procedures that limit this risk.
- Separate duties — place different employees in charge of transaction processing and recording.
- Control access — only authorized employees should have access to accounting systems and physical and financial information and assets.
- Authorize control policies — develop a secure process for initiating, authorizing, recording, and reviewing financial transactions and inventory.
- Update security — install security cameras, engrave “do not duplicate” on keys to sensitive information, and change locks and security codes when cleared employees leave.
Perform Impartial Audits
In addition to regular audits, hire impartial parties to conduct random audits. Examine financial, inventory and other records as you encourage employees to resist temptation.
Create a Positive Work Environment
When your work environment supports collaboration, fairness and recognition and implements clear policies, organizational structure and communication, employees are more likely to remain honest. They will feel goodwill toward the company and may be less likely to commit theft that jeopardizes the supportive environment.
Educate Your Employees
Partner with employees to avoid and prevent theft. They should know your company’s internal controls, conduct and ethics policy, and discipline process.
Ask new employees to review these documents and sign a form indicating they’ve done so, and review the policies at least annually.
Use an Anonymous Reporting System
Equip employees, clients and vendors with the ability to report suspicions or proof of theft, fraud or embezzlement. An anonymous reporting system protects staff while giving you valuable information that protects the company.
Investigate All Theft Reports
Demonstrate that you take theft seriously by investigating every theft report you receive. The investigation should be thorough, prompt and transparent.
Purchase Adequate Insurance
Commercial crime insurance protects your business by covering financial losses and liability. Your insurance agent can help you purchase the right coverage and adequate policy limits.
Learn more about coverage options such as Fidelity (Crime) and other crime products to determine what fits your business.
For specialized solutions, some businesses also consider product-specific offerings like Crime MountainGuard.
Summary
Protect your company from employee theft by implementing several security measures. Together, hiring controls, internal policies, audits, employee education, anonymous reporting and proper insurance can reduce your theft, fraud and embezzlement risk.
Frequently Asked Questions
How can I reduce the risk of employee theft?
Combine careful hiring, clear internal controls, routine audits and a positive workplace culture to lower the chance of theft.
Should I allow anonymous reports of suspected theft?
Yes — anonymous reporting encourages employees to share concerns without fear of retaliation and often uncovers issues early.
How often should I audit financial and inventory records?
Perform regular scheduled audits and add random impartial audits to catch potential problems and deter dishonest behavior.
Does commercial crime insurance cover all types of employee theft?
Coverage varies by policy; review options with your agent to understand what is and isn’t covered for your business.