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In the fifth and final part of this series, we look at some examples of employee theft, and overall prevention measures. In part one we looked a cash handling methods, in part two we looked at credit card theft, in part three we looked look at best practices for preventing theft from inventory, and in part four we looked at employee time theft.

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As we’ve talked a lot about during this series, there is an overriding concept that helps to protect against employee theft: Trust No One. As we mentioned in part one – thefts are almost always crimes of opportunity. The goal of this series, and of owners and managers, is to remove those opportunities wherever possible and to make it easy to find the culprit where removal of the opportunity is not possible. If your business does not have video cameras in place, you are at a serious disadvantage due to the protection they provide to employers, and also to employees. If you take nothing else away from this five-part series it is that video cameras with solve far more problems than they ever create.

Unfortunately, the number one culprit for serious theft from a business is a trusted manger. It should therefore be the responsibility of all managers to create systems that are robust, create a significant paper trail, and to welcome oversight.

Thefts occur for a number of reasons including to solve money issues and general opportunity. A significant number, however, particularly when it comes to managers, occur to get revenge on an employer or prove how clever the employee is to “beat the system.”

Even when thieves are not managers, in retrospect it is often found that they have flaunted their methods to co-workers or not taken basic precautions. These are employees who feel significantly undervalued and feel that they are “owed” what they are taking. What other excuse can there be for an employee who sells high specialized products on eBay under their own name?

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Managers

Giving managers freedom to act of the behalf of the company, does not mean that processes should not be implemented to ensure that the freedom and power that they wield are not abused.

Whether a manager has a company credit card, or just has access to one, statements should not be received at the place of business but to the home of the owner, if possible, and religiously reconciled each month. Similar precautions should be taken with company checkbooks, and company bank accounts. Not giving a manager a company card; but making them use their own which they then have to submit receipts to get reimbursed, can seem like a solution to company credit card abuse. However, a manager using their own credit card only works as a theft prevention method if the expenses claim, that this will ultimately result in, is reconciled with the same care that would be taken with a company credit card statement.

Payroll reports should be inspected every time a payroll is ran. Any employees who are not recognized should be thoroughly investigated. Ghost employees, employees who don’t actually work but collect a paycheck which is then spilt with whoever prepares payroll, can bankrupt a business if not caught.

Accounts such as fuel cards which should also be monitored for abuse. Fuel cards in particular are easily abused as the transactions are often automated and happen offsite. Thankfully, fuel card vendors have a number of systems in place to help monitor and catch embezzlement. Unfortunately, it is often managers with little oversight that setup such systems.

Owners and managers must embrace transparency when it comes to theft prevention, not just pay lip service to it. It is in a manager’s own best interest to create robust systems that create double checks on their own work for their own protection if nothing else. General expense tracking should catch embezzlement, or certainly lead to further investigations but this only works if someone is looking.

theft

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Other Thefts

Stamps, or automated postage machines, are effectively cash. We rarely treat stamps with the same level of reverence and security as cash however. The employee who is running a side business on Ebay and offering free shipping courtesy of your business’s postage is not unheard of.

Cash tips often cause issues when certain employees have jobs that are considered “tip-worthy” and others are not. Tips given to one employee, to give to another, is just a recipe for disaster. If this happens in your business consider implementing a strict handling protocol, such as: the tip is placed in a sealed envelope, in front of the client, and deposited into a lock box to which only the tipped employee has access.

Access to the incoming mail can lead to corporate identity theft. Loan and credit card offers are routinely cold submitted to businesses through the mail. Just like with personal identity theft, it can be difficult to prove that a loan or credit card has not been taken out fraudulently in the name of the business. Corporate identity theft also has the added drawback, for the owner, that the amounts can be so much larger and unless you can prove embezzlement, the company will have to repay the loan. The sorting of mail, unless the business receives considerable volumes, should not be a low-level task. It should be left to the owner or a senior manager. Employees should not receive private mail at their place of employment. If private mail is received, employees should be aware that it may be opened.

Employees should not be able to change prices in your sales system. If it is not possible, or desirable to restrict this ability, a daily report should be ran to ensure that modifications of price have been done in line with company policy and not as a method of theft. Few clients check their receipts, and fewer still say something when they think something looks off.

Always take complaints from clients with regards to wrong change, forgotten change, or overcharging seriously and investigate thoroughly. If the employee can’t come up with reasonable explanation, you may very well have interrupted a theft.

 

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Prosecuting Theft

Always terminate thieves!

Always prosecute thieves!

To an employer the penalties given out in most employee theft cases make it seem not worth the time or effort; however, unless a thief has already been through the process, to most employees being prosecuted carries significant weight. Nowhere is that weight felt more strongly than with your remaining employees. When controls are lack it is not uncommon to have multiple employees stealing at same time in different ways.

When terminating an employee for theft, try to get the police involved at the termination stage. It makes a significant impact on the employee concerned and sends a significant message to everyone else in the business. Of course, if you are going to do this you must have your facts laid out and they must be easy to follow. If the police can’t, or won’t, get involved at the termination stage you may have to go to a police station and report the theft in detail. Again, ensure that you have all your documentation, and facts straight; however, do be careful not to over do it. I once had a case of what I believed was a $1,000 embezzlement that took place over six months. The prosecution never went anywhere, I believe, because the stack of paperwork I presented to the detective was too overwhelming for the amount of the theft involved.

Different states have different amounts at which a theft stops being a misdemeanor and becomes a felony. This will have an impact on how the case is handled and sentence that the accused will ultimately receive if convicted. Always be prepared to go to court, and always make a victim impact statement if given an opportunity to. You cannot complain about being unhappy with the sentence a thief has received from a court if you are not prepared to help the prosecutor and the process.

 

handcuffs

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Examples of Thefts

The following are examples of the type of thefts that I have either been involved with uncovering or have heard about from colleagues. Some are quite ingenious and some are just plain stupid.

1: A late night receptionist who used a reloadable visa gift card to give themselves refunds each night. They would batch out the credit card machine, run their refund, and then rebatch the credit card machine. The only way they were ultimately caught was that the visa card had been a gift from their employer and they had registered it online in case it got lost.

2: A cashier engaging an elderly client in significant conversation so they lose track that they have not received their change.

3: An employee changing prices of items in the sales software, but charging the client full price and pocketing the difference.

4: The super helpful employee who takes the trash out from all around the building, including the inventory storage room where they help themselves to some easily resalable items. The items are removed from the building with the rest of the trash and they then return in the evening after the building is locked up and retrieve the items from the trash. They were ultimately caught because they stole some items that were discontinued and so relatively rare. A search on eBay uncovered the items being sold under their own name. A look at their eBay history provided a history of everything they had stolen over a two-year period. In addition, their listings offered free shipping which explained the thefts of stamps.

5: The employee who discovers that the payroll app has a feature that allows them to clock-in from home before leaving for work and then clock out when they get home giving them an extra 30 minutes every day.

6: The employee with money troubles who intercepts the deposits after they have been placed on the business owner’s desk, taking a portion of the cash of the day and the deposit slip, and replacing it with a new deposit of their own making.

As mentioned before employee thefts are crimes of opportunities. Remove those opportunities and half the battle is won. Create a culture of transparency, and of checks and balances, and the other half will also be won. I mention to employees all the time; “Don’t put me in the position of where I may have to suspect you of something. Make it obvious that it can’t be you.”

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A Very Fictional Exchange

By Mike Falconer

Dr. Try Ingtodomybest: Good afternoon Ms. Dis Satisfied what seems to be the problem?

Ms. Dis Satisfied: Problem? I’ll tell you what the problem is. I’ve been waiting to see you for 45 minutes and then when I do see you it is only for 10 minutes!

Dr. T: I’m sorry, we’ve been rather busy today and we we have had other cases that have taken longer than we would have liked – I’m so sorry for the delay.

Ms. D: You are just too busy, you don’t allow enough time for each appointment. You just try to pack us all in so you can charge as much as you can per hour. Oh and by the way you charge too much – been here 10 minutes and you want to charge me almost $200!

Dr. T: To be perfectly honest there is a certain amount of truth in what you say. We have to schedule based on the best use of our time with the most optimistic length of each visit. If we didn’t, your visit would be even more expensive.

Ms. D: Nonsense. My 10 minute visit should cost the same regardless of what else is going on in this hospital. I am only using 10 minutes of your and the staff’s time.

Dr. T: If only that were the case. You see you also pay for the down time; well actually to be more precise all clients do, just like you all pay for the overhead of the building.

Ms. D: Why should I pay for you doing nothing?

Dr. T: Believe me I don’t want you to, I want you to only pay for the time that you use, but in order for that to happen we need to keep as busy as possible. The busier we are the more efficient use of our labor which is 50% of our cost of your visit.

Ms. D: So what you are telling me is that your time is more valuable than mine?

Dr. T: Only in as much as you value it in that way. In order to make care for your pet accessible there is a balance to be struck between the average waiting time / length of appointment and the cost of that appointment. Let me put it this way, Would you be willing to pay more to guarentee less of a wait time and a longer, on average appointment?

Ms. D: That would be depend on the value of the appointment?

Dr. T: I am assuming that is value as you see it as opposed to how I see it?

Ms. D: Surely they are the same thing?

Dr. T: The value of a heartworm test to me is, other than it being good medicine and the best thing for your pet of course, is what you pay for it and the potential for finding other conditions. If we catch a condition early we can then treat with the better chance of a good outcome because we caught them early. The value for you of a heartworm test is piece of mind and it allows you to receive heartworm preventive which is what is the best thing for the health of your pet. Those points of view both have value, but if our view of value is too out of sync then you won’t get the heartworm test for your dog, neither of us has piece of mind and although your visit will be shorter and I can see another patient more quickly, I will not receive the fee for the test or the medication.

Ms. D: So what you are telling me is that if I want to have a longer appointment with you and less waiting time I would have to pay more?

Dr. T: Well of course. The basic rule of veterinary medicine as things currently stand is the whatever walks through the doors pays the bills. If not enough walks through the doors one of three things happens. We raise our prices, we lower our costs (wages are 50% of our costs remember), or we close.

Ms. D: You could always get more people to come through your doors?

Dr. T: Absolutely, but these are the other side of the coin of raising prices and lowering costs. Getting people through the door when they are not already coming in means lowering prices or raising costs – in other words marketing. If successful it solves the problem if it fails it, course just makes the problem worse.
Ms. D: But this just sounds like all you care about is the money?

Dr. T: The flip side of that is that all you care about is the money! Everyone in the building spends their days with pets and most have made it their career and for less money than they could get in other professions.

Ms. D: I’m tired of that argument – there is value in spending your day with pets most people would love a job like that.

Dr. T: Touche! However the reality does not always live up to the public perception. Hence the high burn out rate and other serious ills of the profession. I’ll give your visit today for free if you can name a television portrayal which matches what actually happens inside a real hospital.

Ms. D: ……

Dr. T: Do you like flying?

Ms. D: No I hate it, packed in like sardines, air travel used to be so stylish.

Dr. T: Why don’t you fly business class or first class?

Ms. D: Because I am not made of money – I come here too often.

Dr. T: A business class seat costs anywhere from 2 – 4 times the price of an economy priced seat because it uses the 2 – 4 times the resources of an economy seat. The most precious of which is, of course, space. Your hankering for the good old days of air travel was when all seats were business class. Lowering the barriers to air travel has meant we can now travel like never before; however, it also means that we do not value it in the same way.

Ms. D: So if I am understanding you correctly, you are telling me that as a Doctor you have to bring in a certain amount of money every hour like a quota. How can I trust you if you are doing this?

Dr. T: That is one way of looking at it. I would rather look at it as I have to carry my share of costs of having a facility like this so it can be open. As long as we charge appropriately the unwritten contract that we have where we charge based on our costs and in return we will make every effort to be cognizant of not taking you for granted and at the same time not letting you take us for granted, will mean that conversations like this will never have to happen in the real world.

Ms. D: Well thank you for your time and for your insights – can I get a payment plan for todays visit please?

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