Embezzlement Avoidance Tips

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In our previous article on embezzlement, we explained what it is and gave some examples of how this criminal activity is achieved. Now let’s take a look at some measures that can help avoid and curtail this crime.

Don’t be Gullible

First and foremost, proprietors and employees who represent them need to understand that they could fall victim to embezzlement at any time. It could happen directly under their noses without noticing any abnormalities in employee behavior or business red flags.

Virtually all cases of embezzlement, particularly in smaller companies, involve a person who is trusted with the financial resources of the firm. However, those who are considered reliable may actually be taking money from the firm for their own benefit, unbeknownst to the business owner.

There are a multitude of cases where an individual who is deemed trustworthy, such as an old friend, but is stealing from their business partner. Similarly, an accountant may be embezzling from his clients. The underlying mistake is that they trust too much. Those who work with the assumption that it can’t happen to them are increasingly likely of being deceived. This is why it is imperative to monitor and validate business transactions.

Although proprietors may not always exercise due caution, it is a significant step to evade situations like embezzlement cases. Business owners must place stringent financial controls on their employees, particularly those who are entrusted with more knowledge regarding the company. For instance, assume that a business owner places extraneous regulations on company personnel. A bookkeeper who is honest and has nothing to conceal, will not be affected by these strict checks and balances because there would be no questions regarding their veracity.

Run a Complete Background Check

Many companies, especially small ones do not take the extra step to run background checks. You will be doing your firm a big favor if you apply this security method. Background checks retrieve information from an assortment of databases, such as, criminal, credit and DMV to name a few. And this should be done before the employee is hired, but if you have not done so, you still can do it while they are employed.

Take to Social Media

That’s right and don’t be shy about it. You can look up a candidate's or employee’s posts on Facebook, Twitter, Instagram and all the others, either with their knowledge or without, but check to make sure you are not breaking any state or federal laws while pursuing this venture. Reading what employees post on social media could give you a fairly good determination of what they are all about. A word of caution, however - you should not use this method other than to determine if the candidate/employee is trustworthy. Racial, ethnic, political or gender beliefs should not be included as a factor; however, if something is found that appears violent in nature, the proper authorities should be notified of course. Consult with your legal counsel before move forward.

Run Random Drug Tests

For the real cautious business owners or those who run companies that manage a lot of money, random drug tests would be prudent and an effective method to deter those who may not be on their best behavior.

There are many legal pitfalls you can fall into regarding this technique and so it is very important that you either speak to your corporate attorney regarding the dos and don’ts of background checks.

Install Cameras

Security camera Just about everywhere you look these days, there are cameras abound and thousands of corporations have them installed in their workplace. Cameras can be a very good deterrent against all types of crimes. Not just white-collar ones. Cameras can play an important part in reviewing cases that are not criminal as well. For example, in a large Wall Street firm, where there were cameras every 20 feet, an employee was running and fell. If the employee wanted to file a lawsuit against the company, they had the proof that there was no negligence precipitated on their part.

Operate a Checking Account

Another technique that can be employed by proprietors is to use a checking account. This can be an effective countermeasure against financial concerns such as embezzlement. For example, if they put all the money that comes into the business in a checking account, they will be much better off.

Likewise, any expenses may be derived from the same checking account. This ensures that there is a legitimate record of receipts and disbursements that no employee can tamper with or alter since the bank is in the ascendancy. The financial institution will maintain control of the checking account, which will make acts such as embezzlement increasingly difficult to orchestrate.

Furthermore, while bookkeepers can falsify entries into the financial statements of the firm, they are unable to manipulate cash in the bank. If all transactions are regularly reconciled with the checking account, there would be no margin for error. The account should be adjusted on a monthly basis and the owner should conduct a review on their own as well.

Create Distinguished Duties

Another advice that business owners can adhere to is that employees are not given carte blanche. This means they should not have unrestricted authority. One such example could be an employee who is given access to set up a vendor, approve the payment and write a check also.

It would better to have two or more personnel involved in a transaction that includes money leaving the business. Likewise, one employee, irrespective of how trustworthy they are deemed, should not devise the credentials of another employee on the payroll system and enable a paycheck to be cut.

This is an extension of the point made earlier that scrutiny is a viable solution that facilitates transparency in business operations. Besides putting rules into place that hinder such actions, the roles of employees should also be tailored to not give them extraordinary influence. This is because there are those who may manipulate their control and exert it by committing acts such as embezzlement.

Examine the Statements

A checking account is just one way to guarantee that authentic records of business activity. Of course, there are other procedures that can be used as a method to avoid concerns like embezzlement.

The proprietor of the business should periodically review financial records like bank statements, credit card statements, and details obtained from independent parties, such as a company that handles payroll. Moreover, this should be done frequently and may even be done unannounced to catch employees off guard. This would be a great way to catch a potential criminal red-handed or in the midst of embezzling from the firm.

As opposed to trusting their employees blindly, business owners should practice due caution and vigilance. This may allow them to identify potential loopholes in the system or recognize embezzlers at the firm. With the appropriate reviews and checks, there will be no margin for error.


Proper auditing of your financial assets is imperative towards keeping an eye on where the money goes and ensures that there are no questions as to any questionable transactions or 'disappearing funds'. An audit is an objective and comprehensive analysis of the financial records of a given company, which is executed with the aim of safeguarding fair representations of all transactions conducted by the firm. This can be carried out internally by employees of the venture or externally by independent firms.

Periodic auditing can prove to be another useful tool for business owners. If an unrelated third party is employed to perform an exhaustive and meticulous audit of every transaction, it will serve as a cost-effective deterrent that could save thousands more if there is any dubious activity taking place at the firm. Given the prevalence of employee theft and embezzlement, audits can aid business owners to impede it.

Don’t Wear an Internet Blindfold

Restrict staff from having carte blanche access to the Internet and severely limit administrative access to more sensitive data to a small number of employees. Hire a firm that can do Internet security checks so that any breaches can be found, as well as locating any possible tampering of computer files.

As mentioned previously, make sure that when you are checking on an employee’s background, you are in line with the laws that are associated with these procedures!

Posted On July 19, 2018