Employers need to recognize the reality that not all of their workers will be honest. They should take precautions to minimize the chance that a worker can steal from the company.
One of the most costly thefts to an employer can be embezzlement of funds by someone with access to the company bank account. The most basic example of this is when someone with check writing authority on the company account writes checks to himself. If he has first access to the bank account statements when they come in, he can destroy the processed check(s) payable to himself that are enclosed with the statements and enter a false payee into the company’s records. Those payments will then appear to be to legitimate suppliers or vendors of the company.
A simple procedure to minimize this type of theft is to direct the company’s bank to send all statements directly to the house of a trusted officer in the company who neither has check-signing authority nor enters accounts payable into the company records. The officer will review bank statements along with the processed checks for any irregularities. once reviewed he will turn them over to the company’s accounting department for processing and recording.
Another source of worker theft is in inventory, equipment and supplies. Sporadic, unannounced internal inventory audits of equipment and supplies usually turn up any irregularities that then can be investigated further as necessary.
As for expenses, it is appropriate to require receipts and expense reports for expenses over a particular dollar amount to be submitted by workers prior to reimbursement. It would again be prudent to conduct sporadic, unannounced internal audits of employees’ expense reports to confirm that receipts submitted for reimbursement on expenses incurred on a business trip coincide with the date and location of an actual trip.
All of such protective measures may not only may catch a dishonest worker before he has an opportunity to further damage the company but also act as a deterrent for those who may be tempted to consider stealing from the company.
Employers should understand that not all worker embezzlement matters are criminally prosecuted but may be handled with private and confidential restitution agreements between the employer and the worker. These agreements do not become public so long as the worker complies with the payment schedule of the restitution agreement. Since many company owners after terminating a dishonest worker are more interested in restitution than the retribution, such agreements sometimes make sense. However, business owners should be aware that such thefts, while in no manner commonplace, are more prevalent than as published in the media.
Employers should acknowledge that they are not immune to being a victim of such thefts and should organize their procedures accordingly.
J. Daniel Marr is a Director and Shareholder at Hamblett & Kerrigan, P.A. His legal practice includes counseling businesses and individuals on a variety of legal issues and advocating on their behalf. Attorney Marr is licensed and practices in both New Hampshire and Massachusetts. Attorney Marr can be reached at email@example.com.