• During These Tough Economic Times, Who's Guarding the Company Checkbook?
  • June 11, 2009 | Author: Matthew L. Vicari
  • Law Firm: Miller Johnson - Grand Rapids Office
  • During these trying economic times, it’s more important than ever for you to make sure your company has safeguards and procedures in place to prevent employee theft and embezzlement and other schemes to defraud or to pilfer inventory. When money gets tight, white collar crime rises. By the same token, in tough times you’re going to be looking more closely at your checkbooks and financials. A $250 check made payable to cash previously might have flown under the radar. It won’t now.

    Your immediate task is to take measures to reduce the risk of employee theft, if you have not done so already. The policies outlined here are often simple and inexpensive to implement, but they can deter any employees who are thinking about ripping you off by dipping into company coffers.

    Screening And Employment Policies
    Clear employment policies on ethical behavior and theft need to be part of the employee handbook you require every employee to sign. Your background checks and pre-employment screening for potential new hires for sensitive financial positions, including those who will control bank accounts or receipts, should be more thorough than ever. Training and employee awareness programs concerning employee theft will let your employees know what to look for and signal that the company is serious—and watching.

    Financial Safeguards And Signs
    Create a division of tasks among your financial personnel. The same employee should not both open the mail and pay the bills. Regular inspections of inventory and audits of the books are a primary way to catch irregularities. Sometimes it’s as simple as reviewing the actual checks and corresponding invoices before the money goes out the door. You might discover handwritten checks here and there when 99 percent of the company’s checks are computer automated: fertile ground for stealing. Fictitious vendors or payroll, vendors with the same address as an employee, checks written to cash … all are possible signs of trouble. Regular reviews of your cancelled checks also can raise questions that require deeper investigation.

    Pay Attention And Lead By Example
    Be aware of your employees’ standards of living. Lavish trips, expensive toys, and nice automobiles in the parking lot often are signs that someone is supplementing their wages. The boss needs to be visible, attentive, and involved, and to set a good example for all by not taking product or equipment out the back door or money from petty cash.

    If your present policies and procedures didn’t prevent theft (and sometimes the best financial safeguards and procedures don’t when someone is determined to steal), take steps to deal with it and try to maximize the return of your money or property.

    Engaging counsel who specialize in this issue early on will help with the preservation of critical evidence, employee discipline or termination, and potential recovery of the money. Your lawyer can help with other aspects of the situation as well. The employee needs to be questioned or perhaps set up in a sting operation, and access to computers and financial records must be shut off. The involvement of law enforcement also needs careful consideration and planning, depending on the circumstances. A civil injunction lawsuit to attempt to lock down and freeze the embezzling employee’s assets is a recovery strategy to consider when you’re trying to recover funds.

    Although insurance coverage for employee theft and dishonesty is an expense you don’t think you can afford right now, it’s more important than ever to make sure you have this coverage and that the limits are sufficient to cover five, six, and even seven-figure thefts, depending on your business. The increase in your premium expense to go from coverage limits of $50,000 to $250,000 likely is not that great and may be the best investment you ever make. Having certain employees bonded also can help.

    During times of declines in your bottom line, it’s crucial for you to have procedures and plans in place that will deter employee theft and fraud and aid in recovery should money be taken despite your efforts. Companies that are prepared will have the best chance to swiftly and effectively deal with the wrong-doers and the loss.