Don’t make it easy for employees to steal from you

“If you make it easy to steal from you, chances are someone will,” observes security consultant Frank W. Abagnale. He should know.

Abagnale, who devotes himself these days to educating the public about fraud risks, is the one-time con artist portrayed by Leonardo DiCaprio in the movie, “Catch Me If You Can.”

You may not think it’s easy for employees to steal from your construction business, but you may be easing the way for the sticky-fingered with careless management practices. Such practices might include sloppy financial procedures or inattentive supervision. They may even involve lapses in professional behavior or shortcomings in ethical practices at the management level.

On the other hand, conscientious attention to good management practices reduces the risk of employee fraud. Beginning with the recruitment and hiring process, effective fraud prevention must be built into every part of your company’s operation.

Obtain and confirm references for new hires, checking their work experience as well as their educational background. It’s a good idea to check for criminal records, even if you need to hire an outside investigating firm. The front-end investment may well save you money and aggravation down the line.

Another early precautionary step is blanket bond coverage for new hires, to protect you in case the employee hightails it with company cash or valuable tools or equipment.

Vigilance should not wane after the hiring stage, as even trusted long-term employees can develop larcenous ways, given the opportunity, if they have a motive and a way to excuse their behavior to themselves.

A motive to steal may come from an urgent need for money, from simple greed or from unresolved grievances against the company. Alert managers may spot warning signs in employees confronted by these pressures.

Holding a grudge

If employees begin spending way beyond their means — driving flashy cars, taking expensive vacations or making costly home improvements — take note. You also may spot signs of extreme financial pressure growing from personal difficulties such as excessive debt, medical expenses, marital difficulties or gambling problems. Personal behavior exhibiting edginess, sudden mood swings or substance abuse problems can provide another red flag.

Warning signs in job performance include close ties to particular vendors, sudden switches to new vendors, strong resistance to record-keeping changes and sloppy record keeping with multiple changes.

Employees who won’t take vacations may be worried that someone will discover their dishonesty. Those who arrive before everyone else and stay after others have gone home may not be as diligent as they seem; they may be looking for solo time with important records.

Employees with a grudge against the company — growing out of a reprimand, a dispute with a supervisor or a cutback in pay or benefits — may see theft as a way to settle the score. Listen for signs of resentment and watch bitter workers with special attention.

Sticky-fingered employees cost American businesses $600 billion annually, according to the Association of Certified Fraud Examiners, with the heaviest losses to small businesses. Median annual losses in companies with 100 or fewer employees run $127,500, compared to $95,000 for large companies.

You can’t completely eliminate your company’s employee fraud risks, but with careful management, you can make it a lot harder for your employees to steal from you. We can help you design effective internal controls to reduce the risk of employee fraud.

Oreste J. Mosca is a shareholder/director at Nathan Wechsler & Company, Concord and Laconia. He oversees the firm’s audit and accounting policies and procedures.

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