Ah, the old dipping into the till. A little case of the old borrowing from Peter in order to pay Paul syndrome. In the case of embezzlement though, you always get to be Peter and never get to be Paul. Unless of course, you just happen to be the embezzler.
Embezzlement is a crime of theft usually perpetrated by an employee within the business or some other party that holds a fiduciary responsibility over someone else’s assets, usually money. It differs from larceny in the way the property in question changes hands and is defined as “the fraudulent conversion of property of another person in lawful possession of that property.” In other words, if I’m an employee that has access to bank accounts, credit cards or financial matters that really belong to my employer and I turn them into my own, I’m guilty of embezzlement. In the case of larceny, I should never have had access to those things in the first place.
On a small scale, it usually starts out simply and innocently enough.
A person with access to something such as a petty cash fund or a bank account that doesn’t get looked at too often realizes that they are a bit short on funds for a period of time. Rather than go the fringe banking or payday loan route where they’ll be charged some kind of astronomical interest rate, they decide to “borrow” some of the money in order to meet their needs. Of course, they rationalize their behavior by having the best intentions to pay the money back as soon as possible but something might happen along the way. They either get caught quickly by somebody on the ball and get fired, or, they get away with it and think to themselves, "Hmm, that was pretty easy” and it isn’t long before it becomes a necessity to meet their ever expanding lifestyle.
On a larger scale, embezzlement can involve teams of people such as lawyers and accountants and usually an insider or two who conspire to fudge the numbers in order to cover their tracks. If they’re really good, it might take years to unwind the transactions and they might be long gone and walking sandy beaches on distant shores in an effort to avoid criminal prosecution.
If you own a small business such as a Mom and Pop retail store, restaurant or bar, here are some tips that might help you from getting pilfered.
You’re the boss for Christ sake, set a good example! Don’t be dipping your hand in the cash register to borrow money here and there for personal reasons. Your employees might take this as a signal that what’s good for the goose is good for the gander and it won’t be long before they too rationalize such behavior.
If you don’t have an accountant and have an aptitude for financial dealings, reconcile your own bank statements and receipts. If you do have an accountant, make sure it’s somebody that you trust.
Before you hire anybody, check their references. See if they’ve ever been fired for theft, fraud, larceny or forgery over the past years. If they have, there might be a good chance that they’ll take up the habit only this time at your expense.
If you have people doing the bookkeeping or accounting functions for you, it might be a good idea to spot check their numbers on fairly frequent basis. Even though these folks might have been with you for years, these are positions of trust and a trusted employee is often the one who can cause the most damage.
Set up your own little system of checks and balances. These might involve two or more sets of eyeballs going over the numbers on the bank statements and credit card receipts.
This one might seem like common sense but you’d be surprised. If you’re the only one who can sign checks on behalf of your business, never sign a blank one. Sure, you might headed out of town for a week or so and it might seem easier to do something like that should your creditors come calling, but if you’re in good standing with them, they’ll wait.
Have the books audited on an annual basis in order to ensure that they’re not being cooked. In the short term, that might seem a little expensive but if it prevents fraud from occurring, it’s probably well worth it.
The following might be some steps you might take in order to prevent someone from getting a case of the light fingers or spot someone who already has.
If possible, don’t let the same set of eyeballs do things that are incompatible. For instance, if one person is writing the checks, have another reconcile the numbers from the bank.
I don’t know about you, but I normally don’t like to work long hours or take work home with me unless I have to, I’d be a little wary if I was closing up shop and left someone who had access to financial matters unsupervised for long periods of time on a regular basis.
If some of the folks you employ have expense accounts, make sure they are managed and you get receipts for any money that you are laying out or reimbursing.
Watch out for people who like to point fingers. Often they are trying to cover up some misdeed(s) of their own and are trying to set up an alibi should their little scheme be discovered.
Know who you are doing business with and know who your vendors are. If you start seeing checks written to anybody you’re unfamiliar with, question it immediately. Sometimes embezzlement requires the finesse of a third party for the embezzler to cover their tracks .
Last but not least, look for certain changes in your employee’s lifestyle. If they’ve been driving to work in a beat up Ford or Chevy and one day they show up in a brand new Mercedes-Benz, be on the lookout. If they claim that they hit the lottery or came
into an inheritance from a long lost family member, be even more suspicious.
If you ever discover that you’ve been the victim of embezzlement and depending on the amount that was stolen, it might be easier to handle the situation on an informal basis. One option would be to work out some kind of repayment plan. The hassle of going to court over a relatively small amount often isn’t worth it. Naturally, if it occurs on a larger scale, it would probably behoove you to get the authorities and powers that be involved on your behalf.