Recently I came across a headline that stopped me in my tracks. It said: ‘A company’s most costly thieves already have keys to the building.’ It was written by David Burke for CBC News and posted, as the lead for a story about small business theft, on February 16, 2017. I started digging.
As a wealth advisor many of whose clients are the owners of small businesses – and I am, of course, a small business owner myself – the idea of employee theft is a hard one to swallow, especially here in delightful small town Kentville, serenely nestled in the Annapolis Valley. But it happens.
Employee theft costs Canadian businesses about $1.4 billion dollars a year
Employees steal about $2,500 in cash or goods from their employer before they’re caught, according to the Retail Council of Canada. On average, customers steal about $175.
According to the Insurance Bureau of Canada (IBC) small business operations that have limited procedures, policies and internal control mechanisms in place are particularly vulnerable to employee theft and fraud. Examples of dishonest activity within an organization include:
- Cargo theft.
- Theft of cash, cheques, business equipment or client property.
- Data theft or cyber-related embezzlement.
Every year, employee theft costs Canadian businesses about $1.4 billion dollars, activity that not only affects the bottom line but also delivers a sharp sting of surprise and sorrow to the owners affected. Trust is the glue that binds most business – and relationships in general – and when that is undermined cynicism sets in.
The Retail Council of Canada believes there are 566,000 employee thefts that go undetected each year across the country, but that’s only an estimate. There’s no way to know for sure.
People don’t steal from people they like
Mr. Burke quoted Stephen O’Keefe, a retail advisor with the council and a consultant, who believes employees manage to get away with theft for a number of reasons. Some thieves know how to outwit the security system, while others are just lucky. “They’re doing it right under the nose of the security camera,” O’Keefe was quoted as saying.
Alarm systems, security cameras and checks and balances covering a company’s financial transactions can all be helpful but, according to O’Keefe, the main way to prevent employee theft is by having an engaged workforce that cares about the company. “People don’t steal from people they like,” said O’Keefe.
Business owners are tight-lipped about the problem
Despite the numbers, it appears that only a small percentage of employees steal from their employers and most people are putting in an honest day’s work. The retail council doesn’t break down employee thefts by region, so it’s unclear how much of it is happening in the Atlantic provinces.
Part of the problem is that many business owners refuse to discuss the issue publicly. According to Mr. Burke CBC News reached out to several businesses throughout the Atlantic region to discuss this topic and only one agreed to be interviewed.
Hints about confronting employee theft
What follows are just a few suggestions about how to minimize, better yet eradicate, employee theft:
- Take the time to verify information on resumés and contact all the references.
- Have a manual that outlines your expectations of responsibilities and the standards of honesty, security procedures and consequences for following, and not following, your procedures.
- Ensure the potential employee reads the manual, understands it, and signs it as a condition of employment.
- Keep accurate records on cash flow, inventory, equipment and supplies. Check it regularly.
- Limit access to keys, your safe and computerized records.
- Have “Do Not Duplicate” engraved on keys that are handed out.
- Change locks and access codes when an employee is terminated.
- Take action quickly if you should discover internal theft, sending a message to other employees that theft is not acceptable.
- Reward your staff for discovering security problems and for doing a good job.
Dave Ritcey, The Ritcey Team, Scotia Wealth Management