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em·bez·zle·ment

[əmˈbezəlmənt]

NOUN

embezzlements (plural noun)

theft or misappropriation of funds placed in one’s trust or belonging to one’s employer.

“charges of fraud and embezzlement”

*Definition provided by the Oxford Dictionary

 

Embezzlement, also known as employee theft/fraud, and what that looks like for your Small Business.

According to the Better Business Bureau, 30% of business failures are caused by employee theft.

ACFE’s 2014 Global Fraud Study revealed companies with less than 100 employees had an astonishing 28% higher fraud loss than the larger businesses.

Let’s start with a True Case from 2015-

According to the FBI, a Kansas Bookkeeper was convicted of embezzling more than $731,000 from her employers:

  • Plumbing Supply company for more than $543,000
  • Nursing Center in Kansas for more than $188,000

“When she was caught, it was found she had also stolen from several other employers,” the report states. She was sentenced to 22 years in Federal Prison

How could this happen?

Bank Fraud.

Our bookkeeper mentioned above wrote herself checks and signed her Employers Name.

How did she get away with it for so long?

Altering financial documents and not paying vendor invoices.

Our same bookkeeper from above took steps to conceal her scheme, such as altering the company’s financial records to show that vendors had been paid when, in fact, they had not been paid. When vendors attempted to collect, she answered the calls and hid the claims from her employer. As vendors began to freeze the company’s accounts, our above mentioned bookkeeper created new checks and forged her employer’s name on the checks to pay the most critical invoices.

Case information courtesy of https://www.fbi.gov/contact-us/field-offices/kansascity/news/press-releases/kansas-woman-sentenced-to-22-years-for-stealing-731-000-from-two-employers

Embezzlement can look like many different things. It can happen at any point, for any reason, even by our most trusted, seasoned, and top performing employees.

Let’s go over just a few scenarios:

  1. Have you noticed new or unexplainable purchases on your corporate credit card statement?

Perhaps there is a misappropriation of funds. What can this look like?

  • Unauthorized meals
  • Unauthorized Fuel
  • Grocery store

Anything used for personal gain, not authorized by the company and does not benefit the company.

  1. Are your credit card sales not adding up?

Perhaps an employee is processing “cash refunds” on credit card purchases. What can this look like?

  • Your daily batches will show unexplainable refunds

In the Retail Sales Industry, this is not necessarily an uncommon practice, but what about your specific business or industry? Is this common for you?

  1. Are profits/income down with no reasonable explanation?

Perhaps an employee is stealing. What can this include?

  • Tangible Inventory like Goods/Services
  • Time
  • Data
  • Bank Fraud

Warning Signs:

  • Come in early/leave late
  • Leaves vacation time on the table
  • Refuses help from others
  • Hoards company payment/financial information
  • Abruptly resigns

How can I lower my risk as an employer?

  • Be involved and informed

As the business owner, it is your job to oversee what is happening in your company. Just because you may not know what is going on, it certainly does not mean you shouldn’t. Ask questions.

  • Outsource

Although you may have an office manager or staff accountant that is more than qualified, it is never a bad idea to outsource financial pieces such as: Accounting, Billing, Inventory Control, Payroll, or Auditing just to mention a few.

  • Company Assessment

It is a good idea to have a bi-annual assessment performed by an outside company.

This could be Operational, Financial, Training or whatever you feel could use more focus.

 

For more information, contact us today!

Healthcare Industry – www.hmekc.com

Business Service Industry- www.bmekc.com

1201 NW Briarcliff Pkwy., Ste. 200, Kansas City, MO 64116

Phone 816-746-7499

Post Author: bflippin

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