Employee Theft, Fraud and Embezzlement: Prevent Hiring Mistakes

Employee Theft, Fraud and Embezzlement: Prevent Hiring Mistakes

How well do you know your employees?

When it comes to employee theft, fraud and embezzlement, sometimes there is no recovery. Unfortunately, the reality is that the court system will not be able to help you recover any losses, even after spending thousands of dollars in legal fees. I’m sure you have heard the phrase, “An ounce of prevention is better than a pound of cure.” No truer words have been said.

The best solution is to prevent problems rather than trying to cure them.

Some of the Best Prevention Measures

Hire Slow and Fire Fast

What does that mean?  When interviewing and getting an Employment Application, obtain as much information about the candidate as you can right then. You will, likely, never get it later. Part of this process should also include getting authorization from the candidate to pull their personal credit report. This is mandatory and can prove to be the major difference in hiring one candidate over another. Pulling the credit report should be done regardless of whether or not the candidate will handle cash or money in their employment.

If the candidate has financial or credit problems in their personal lives, it stands to reason it will affect their job and professional performance. You’ve also heard the saying, “Desperate people do desperate things.” You don’t want to be a victim of your employee’s problems.

Theft can be in the form of stealing money, inventory, supplies, faking expense accounts and, one of the most common forms of theft, stealing time – paying an employee for time not worked. These are all forms of dishonesty. If gone unnoticed, it will continue and losses will keep mounting higher and higher.

When noticed, fire immediately!  Make sure you have undeniable proof so the employee has no defenses on their side. Theft, fraud and embezzlement is either black or white. There should be no tolerance for it in any company.

Call All References

Verify truth and accuracy of all information on the job application.

If you uncover any lies or misrepresentation on the application, shred the application and move on to the next candidate. If a candidate will lie during the hiring process, they will lie to you once they are hired. Zebras do not change their stripes.

Most employment applications ask for educational background and degrees. How many employers actually call the college and verify the degrees the applicant stated on the application or in their resume? Almost none.

Honest people have nothing to hide and will be truthful with everything they say and represent. Dishonest people, on the other hand, will prey on the weaknesses of an employer and get away with whatever they can for as long as they can at the expense of the employer. Call the Dean or Registrar of the college. They will verify when the candidate attended the college, whether they graduated or not, and what degrees they earned at that college.

When calling previous employers, the most important question you can ask is, “Would you hire this person again?” The answers you get will be very enlightening and should guide you in your decision. The only acceptable answer is yes. A no answer, or a no comment, tells you the same thing. If a previous employer will not hire a candidate back with previous experience, why should you?

Do Not Take Shortcuts in the Hiring Process

It is harder to fire an employee than it is to hire one. You need to make sure when you fire someone you have all the ammunition to do so with no repercussions. Make sure all company policies, procedures and violations are spelled out in an Employee Handbook or in writing of some form when the employee is hired. Have the employee sign an acknowledgment that they have received this information.

Do you have an E&O (Employee and Officers) or (Errors and Omissions) insurance policy?  Depending on the coverage and the deductible, your insurance agent can tell you what kind of coverage you need for this kind of protection.

Hire With Your Head, Not Your Heart

You run a business. Treat your business seriously and it will reward you seriously. Turnover is very expensive. It is always less expensive to keep an employee than it is to find another. The key in any business is hiring the right employees.

This is just the tip of the iceberg in hiring employees and preventing from hiring the wrong employees.  For more detail or a deeper dive into this area, feel free to contact us at First Beacon Business Advisory Group.

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