As a business owner, one of your important tasks is to keep an eye on your company’s resources. This means being aware of any signs of employee theft. We have developed this post to help inform you about some methods of theft that employees have used. You might then use this knowledge to identify or prevent such from being your experience.
What is Employee Theft?
Theft here is when an employee misuses or steals the business funds or property. Employees or business owners can do this in different ways, as shown in the list below.
It typically happens when an employee or business owner takes or misuses company funds. For instance, an employee might take payment for a transaction but not deposit the money into the company’s bank account.
Check the list below for more examples of theft that employees have used on businesses.
Methods of Theft that Employees Have Used
Theft covers various actions where employees or decision-makers steal or misuse company resources. Here are some examples of methods of theft that employees have used:
1. Cancel Transactions at the Cash Register
When an employee records a transaction and receives payment, they might cancel the transaction from the cash register later and keep the money for themselves. This can be tricky to catch because the system may still appear balanced, and the customer got their product or service, but your company didn’t get the payment.
What to do
You can prevent this form of employee theft by upgrading to a modern point of sale system that requires a supervisor or manager’s approval to void a sale. This feature will help avoid giving employees the chance to exploit the situation.
2. Take Cash from Fundraisers for Personal Use
If your business or organization holds fundraisers, you might collect donations that aren’t counted immediately. If only one person has access to these funds before they are recorded, they may take some for themselves.
What to do
The common solution is to assign more than one employee to handle the collection and counting of funds. This way, there is better accountability and oversight.
3. Deposit Customer Checks for Personal Gain
An employee might create a bank account with a name similar to the company’s. Then, they can cash customer checks or redirect electronic payments to their account instead of the company’s.
What to do
Avoid having one employee responsible for both collecting payments and managing accounting records. Assign these tasks to different people, so multiple individuals can detect any potential issues.
4. Charge Customers Excessively
An employee might overcharge customers which is one of the common methods of theft that employees have used. This works by setting prices higher than your company’s rate for a product or service, or by adding extra fees and keeping the extra money.
What to do
The simple fix for this form of theft is to regularly conduct audits of customer billing practices. Also, investigate any customer complaints related to billing or additional fees. This will help ensure transparency and fairness in your billing processes.
5. Create Fake Payments
An employee could write checks to themselves or transfer money from the employee bank account if they have access to your information and signature. They may hide these payments by making fake accounting entries.
What to do
To prevent this, don’t provide access to your electronic signature, and regularly audit expense payments to spot any unusual activities. This will help you detect and address any potential fraudulent actions.
6. Make False Vendor Payments
In simpler terms, sometimes, an employee might create fake vendor accounts or change accounting records to make it look like they are paying vendors.
Instead, they end up sending that money to themselves.
What to do
You should regularly check all payments to vendors or have multiple workers review your entries.
7. Customer Credit Card Data Theft
In simpler terms: Some employees who take customer credit card data for purchases may write down the card numbers to use for their own shopping. This is like stealing from customers and can make people lose trust in your business.
What to do
Use payment software that hides the full credit card number and try not to collect information manually unless it’s really necessary.
8. Double Dipping
Employees might try to get extra money from the company by charging expenses on their company credit card and then requesting reimbursement as if they paid for it themselves.
What to do
It’s important to separate responsibilities so that other employees can verify if an expense has already been covered. Using expense management software can help streamline this process.
9. Improper Use of Expense Account
Employees can ask for reimbursement for expenses not related to company functions, like getting their personal lunch covered, even if it’s not for a client meeting.
What to do
Establish a clear policy on what expenses are eligible for reimbursement. Additionally, use expense management software to gather data and receipts efficiently.
10. Exploitation of Employee Discounts
When a store or restaurant provides discounts exclusively for employees, some people might try to share these benefits with friends, family, or others.
What to do
Make a clear policy about who is eligible to use these discounts and who is not. Keep an eye on any employee making excessive purchases to ensure they are following the rules.
11. Unauthorized Cash Removal
When employees have sole access to cash, they might take small amounts, hoping no one will notice. But these little thefts can accumulate over time.
What to do
Be cautious when one employee is responsible for handling money or making bank deposits. Follow cash-handling best practices, such as having more than one person involved in completing these deposits, to avoid any issues.
12. Unauthorized Acquisition of Office Supplies
An employee might take office supplies from your storage area and bring them home or sell them.
What to do
Keep only small amounts of supplies accessible at once or have employees request more of a particular item when needed. This way, you can better control the usage and reduce the risk of theft.
13. Removal of Store Equipment
Equipment typically includes larger items like computers or tech devices. Sometimes, employees may take these items home or sell them for money.
What to do
Consider having employees sign out large devices or require that they must remain in the office when not in use. This will help ensure better control and reduce the chances of equipment theft.
14. Selling Trade Secrets to Competitors
This kind of embezzlement happens when an employee sells valuable information to a competitor.
What to do
Only grant access to necessary information for each person’s job. Keep important data in secure storage and monitor who can access it.
15. Use of Company Credit Cards for Personal Expenses
If your employees can use company credit cards, using them for personal shopping could be considered embezzlement.
What to do
Establish clear guidelines for credit card usage and regularly review the purchases made.
16. Burglary
People who work at your location and know important details like alarm codes or where valuable items are located might be involved in burglaries.
What to do
Use security cameras and alarms, and keep a close eye on who has access to sensitive information.
17. Theft of Merchandise
Some retail employees might take products from the shelves or grab items that have been returned.
What to do
Make sure to have good inventory and returns practices, and use security cameras to keep an eye on what’s happening.
18. Stolen Equipment Claims
An employee says their laptop or equipment was stolen. They get a new one but either keep the old one for themselves or give it to a family member.
What to do
Use software to find company devices or disable them if they’re lost or stolen.
19. Fake Employee Payroll
Some employees who handle payroll might create fake employees and pay them to steal the money.
What to do
Regularly check payroll documents against employee records. It’s also a good idea to outsource payroll to a reliable provider.
20. Unauthorized Appropriation of Tax Funds
Some employees handling tax payments might keep the money for themselves, leaving the funds missing, and you with a bigger tax bill.
What to do
Regularly audit your tax practices or hire a trusted tax service.
21. Receiving Illicit Kickbacks
Kickbacks are payments that vendors give to employees to get your company’s business or special favors. It is not very common as one of the methods of theft that employees have used.
What to do
Improve your accounts payables and receivables management by selecting vendors directly or forming a committee to make these decisions.
22. Theft of Personal Information
This kind of embezzlement happens when an employee uses your business name to open credit cards or take loans for their own shopping.
What to do
Keep an eye on your company’s accounts and credit score regularly to catch any unusual activities.
23. Opening a Personal Business Using Company Resources
If an employee uses company time, equipment, or money to secretly start their own business, it’s considered embezzlement.
What to do
Establish clear rules about the proper use of company resources.
24. Ponzi Schemes
A ponzi scheme happens when a company promises high returns to investors but uses money from new investors to pay them, instead of using profits from its actual product or service. It’s often found in financial management and retirement planning businesses.
What to do
Keep a close eye on how money comes in and where it goes. If dealing with investors, always be fully transparent about where the funds come from.
25. Creating False Business Records
In some cases of embezzlement, people falsify business records to hide the misuse of funds or deceive investors.
What to do
Hire a reliable bookkeeping company for these tasks and conduct regular audits of your records and finances.
Other methods of theft that employees have used:
26. Skimming
In simple terms, this scam happens when an employee overcharges a customer but keeps some of the extra money for themselves.
It can be as simple as taking cash from the total amount or using coupon codes to pocket the difference. In busy places like bars, it’s easy for employees to do this and blame the cash register discrepancies on the fast-paced environment.
27. Under Ringing
Under ringing is a tricky scam that’s not as obvious as skimming, as the cash register total seems correct by the end of the day. However, it affects your inventory count. When an employee charges a customer for five items but enters only four in the cash register, that’s under ringing.
Keep in mind that self-checkouts are also vulnerable to under ringing, apart from employee theft.
You might not realize something’s wrong until inventory day when you find out you’ve sold out of item X, but there are no sales of that item in your records.
The larger your business and inventory, the tougher it is to catch this scam. Installing security cameras in your restaurant can be helpful in finding the missing inventory.
28. Sweethearting
One of the methods of theft that employees have used is sweethearting, which can happen in different ways, but it generally involves an employee giving special discounts to friends or family members. This can be done by using their employee discount or using cash register tricks like voiding a scan, giving a refund without returning the product, manually changing the price, or not scanning an item at all. It’s one of the main types of discount abuse.
Sweethearting costs businesses almost $100 billion every year – NRF.com. The employees who do this may not realize the impact or feel they deserve the discount. It’s challenging to catch this theft because you can’t always tell if the employee was making a personal purchase during their break.
With Solink, you can identify discount abuse by seamlessly integrating your POS and security cameras without the need for a text inserter.
29. Product Theft
Product theft is when employees take items from the workplace without permission. It can be as simple as grabbing a box of fries or a latte for themselves.
While they may think of it as a small perk, these stolen items can add up over time. It’s like an internal version of shoplifting, and you can use the same methods to catch employees stealing. Some employees may take larger items, and there’s no excuse for that. It’s essential to stop employee theft to reduce losses.
30. Blunt Theft
Blunt theft is when an employee takes cash directly from the register. To find out who might be involved, start with those who have expressed feeling underpaid, under-appreciated, or taken for granted.
It can be tricky to identify the thief, especially if multiple staff members use the same register throughout the day and the cash handling procedures are complex.
31. Time Theft
When employees come in late, leave early, or take long breaks, it can harm your business. It becomes even more costly when you have to compensate for their absence by adding an extra person to the sales floor. Check out our related article on how to recognize and reduce time theft.
32. Short Ring
Your bartender prepares a Cosmo drink that should be sold for $10, but they enter it into the cash register as a cheaper screwdriver drink worth $5. They keep the extra $5 for themselves. This sneaky trick is tough to detect until you notice that your inventory is not adding up correctly. This popular scam can end up costing your business thousands of dollars by the end of the year.
One reason why this method of employee theft continues is due to inadequate loss prevention training. When a new bartender witnesses a senior employee doing the trick, they might assume it’s an accepted practice by management. It’s crucial to regularly talk to your employees about theft, so they understand you take it seriously. This is just one of our tips for discussing theft with your staff.
33. Gift Card
There are several methods of theft that employees have used to scam gift cards, but one of the easiest is when an employee scans a customer’s card, says it’s empty, and then secretly keeps it because there’s still money left on it.
Read also: Fake excuses to call out of work
