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The possibility of employees stealing from the company isn’t something that any business owner wants to think about, but it’s a reality. It’s better to understand the mindset that leads to employee theft, know the warning signs to look out for, and implement strategies to prevent the behavior from occurring in the first place than to bury your head in the sand and hope for the best.

Hiscox recently released this study on embezzlement. It includes up-to-date statistics as well as advice for small business owners. (The Hiscox study looked at federal court cases involving companies with fewer than 500 employees. Those cases comprised almost 70% of the embezzlement cases in federal court.) Let’s break down their findings.

Isn’t my small business too small for embezzlement?

Think again. Eighty percent of companies who fall victim to employee embezzlement have fewer than 100 employees, and almost half have fewer than 25 employees. The largest risk is for companies in financial services or non-profits, but two-thirds of embezzlement cases happen outside those types of organizations so don’t settle into a false sense of security.

What’s the average amount stolen? Over $800,000. And over one-third of cases were over $500,000. Remember, this amount of theft doesn’t happen overnight. Often it happens over years.

I can spot a criminal from a mile away.

The portrait of the typical embezzler may not match what you’d imagine: a 49-year-old woman who is one of your most trusted employees. Although women are responsible for slightly more than half of these crimes, men are catching up quickly, increasing by over five percent this past year.

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There’s a reason for the old saying “It’s always the ones you least expect.” Because you trust this employee, you won’t be micromanaging her work or finding every small inconsistency suspicious. The more you trust and empower your employees, the easier it may be for embezzlement to slip by undetected.

Buy my employees would never!

Because most embezzlement is perpetrated by average people under extraordinary stress, it’s hard to envision how the transformation into a criminal occurs. As you can imagine, the initial motivation for embezzlement is often financial pressures outside of the office. When that employee has access to company money and the skills and opportunity to “cook the books,” the temptation may be too great.

Many embezzlers begin with intentions to pay back the money but lose that desire when they aren’t caught, convince themselves others are stealing as well, or begin to justify the theft. Feeling underpaid is a particularly strong motivator to steal again as the employee convinces herself she’s only taking what she deserves.

What are the warning signs?

Hiscox identifies five traits of embezzlers: intelligent, big spender, risk taker, hard worker, and disgruntled. Embezzlers tend to be smart and ask questions. They want to know how the company works. This trait may make them indispensable, but it also means they may have financial information and know-how that wouldn’t otherwise be a part of their job description. Big spenders may more easily find themselves under financial stresses, and of course, the sudden ability to make big purchases could be a red flag.

Those who break the rules or think they are above them may find it easier to push aside qualms. Employees who work the hardest may have the shortest distance to travel to resentment, especially if they feel they are not properly remunerated or acknowledged. Disgruntled employees already have a chip on their shoulder and may find it easier to justify behavior that harms the company.

Does it matter what position the employee holds in the company? In the end, those with the most access to company money steal the most company money. For example, controllers or comptrollers steal four times as much money as bookkeepers. Overall, managers embezzle more frequently than employees do.

How do they steal the money?

The most common type of embezzlement is outright theft, taking cash or transferring company money into personal accounts. Check fraud, including forgery and writing checks to themselves, is next. Credit card fraud can take the form of paying for personal purchases with a company card or even falsely creating a line of credit. Fake vendor invoices and payroll fraud are other ways employees commonly divert company money to themselves. Employees may pad real bills, make up fake vendors and bills, or skim money they pay to employees who no longer work at the company.

How do I protect my company and myself?

Of course you are already performing background checks on all employees who have access to company funds. Hopefully it goes without saying that you should also be aware of dramatic shifts in behavior and any major stressors in your most trusted employees’ lives.

One way to introduce more checks and balances into your company’s finances is to split financial duties between at least two employees. This means each person will have more oversight, and it may serve as a deterrent. You should also have bank statements and credit card bills sent to your home address. This way you can review the charges before bringing them into the office for reconciliation.

Conduct background checks on all vendors, and have different employees in charge of vetting vendors and paying them. Review payroll records on a regular basis, and require more than one person’s approval for changes.

Being diligent regarding embezzlement risks doesn’t mean you don’t trust your employees. It’s simply good business.