7 Common Warning Signs of Employee Theft

Beyond working hard to ensure business survival in a competitive market, many companies have to worry about tackling fraud. According to this report, companies lose at least 5% of their annual revenue to embezzlement. Small businesses suffer the most since they have more to lose. Businesses lose approximately $8300 monthly to occupational theft, which can affect the profit margins.

Employee trust is an essential foundation of a successful business. Companies stand a lot to benefit from hiring hardworking and trustworthy employees. Having dedicated staff also promotes a productive working culture. Despite this, data shows that employee theft is increasing, from office supplies to cash misappropriation.

Sometimes, some companies make the mistake of delegating all financial tasks to one person. Assigning all money-related duties to one person makes it harder to track fraud. Businesses must delegate financial records, payments, and asset management tasks to different teams to curb embezzlement. Unfortunately, team leaders and CEOS have limited evidence to prove employee theft. However, many behavioral habits point to fraudulent behaviors.

Instead of risking false accusations that could lead to legal problems, look out these warning signs of employee theft instead:

Sign #1: Sudden expensive purchases

Sudden expensive purchases is one of the most obvious warning signs of employee theft. You may think your employee’s lifestyle outside of work doesn’t concern you. However, sudden excessive spending habits could point to embezzlement. Unless you pay out five to six-figure bonuses, having employees who live above their financial means is a red flag. Sometimes, people receive expensive gifts from wealthy family members. Other times, they save up to treat themselves to luxury. It’s hard to decipher fraud from one or two lavish purchases.

However, if their expensive spending becomes a habit, you might need to look at your books. While this doesn’t warrant an investigation, watch out for other signs and monitor them closely.

Sign #2: Reduced profit margins

Are you experiencing declining profit margins? Maybe that’s because of unplanned business expenses. Sometimes, wrong financial decisions also reduce your profit projections. Otherwise, you might have a case of employee theft. If someone on the team is skimming funds to fund their lifestyle, the profit margins will reduce.

Use corporate investigation services to analyze previous transactions and business performance reports. If possible, install an account payable software to track all business expenses and transactions.

Sign #3: Data theft

In 2020 alone, 47% of American companies experienced data theft. These companies also spend millions of dollars to recover from data breaches. Although people associate data theft with hackers and viruses, that’s not always the case. Do your employees handle sensitive client information? Maybe consider the possibility of an insider leak. Insider data theft happens when an employee sells sensitive information like credit card data and business secrets to third parties.

On average, about 53% of companies found 1000 sensitive files accessible to every employee. Insider leaks could expose your company to bad press and expensive lawsuits. Limit employee access to sensitive data and automate secure cloud storage. After terminating an employee’s contract, disable all passwords and emails.

Sign #4: Customer payment dispute

Customer payment disputes aren’t strange news to companies that offer products and services. Mistakes happen. But what if most of your customers have problems with their transactions? You’re probably dealing with a case of embezzlement. If your customers keep getting charged for a bill they previously paid, consider inspecting your records.

If your vendors also keep sending reminders for a subscription you previously sorted, there’s a possibility of a fraudulent scheme happening in your organization. Lapping schemes happen when customers get assigned incorrect payments to cover up a stolen one. Again, consider automating your deposits instead of manually signing checks and writing invoices. Payment software enables you to send and track payments without having to worry about fraud.

Sign #5: Addiction problems

Fraud examiners believe that three factors cause people to commit fraud–opportunity, pressure, and rationalization. First, an unsharable financial problem causes them to consider illegal solutions like cash theft or fraud. Some of these problems could range from debt to addiction problems like drugs, gambling, and compulsive shopping.

People with addiction problems don’t start with intentions to steal. However, these habits cause severe debt that sometimes makes them turn to illegal means for sustenance. Re-assign employees battling addictions from safety-sensitive duties and follow up with company policy-directed action.

Sign #6: Long absence

Many people who commit white-collar fraud have little to no criminal history. However, the perceived opportunity to solve their problem causes them to abuse their position. To maintain the facade of innocence, they need to keep their activities secret.

Health concerns and family issues legitimately cause a long absence from work. Well, if your employee keeps coming up with endless excuses to stay away from work, they possibly have something to hide. Other signs include a sudden urge to work independently and a strange influx of unfamiliar guests and vehicles.

Sign #7: Frequent missing or damaged products

Successful businesses maintain a standard audit and inventory system. Without these two, you can’t achieve customer satisfaction. What if customers still complain of damaged products after you’ve sorted your product quality?

There’s a chance someone is swapping your products for substantial alternatives. Here, an employee steals the product, sells it for a higher price, and replaces it with a damaged one. If they’re too sloppy to bother with a replacement, you’ll find your stock dwindling faster than you planned.