Safeguards for reducing employee theft

The U.S. Commerce Department estimates that American companies lose $20 billion to $40 billion annually to employee theft. It's a huge problem, and small retail businesses tend to suffer disproportionately. Why? Smaller firms often operate on razor-thin profit margins. As a result, when employees misappropriate assets or "cook the books" at a small company — especially over long periods — the impact can be devastating.
Fortunately, employee theft can be prevented or minimized — even at a small retail firm — by implementing the following common sense safeguards:

• Detailed background checks. Following up with listed references and interviewing former employers is especially important for job candidates who will be placed in sensitive assignments. But even those folks who work in your warehouse or on your sales team should be reliable and honest. Any indications of fraud in a potential employee's work history should be investigated. Your firm's application form should request relevant details that might highlight potential problems. After all, it's much easier and less costly to pass over an applicant than to terminate a long-time employee who's been stealing for years from your company.

• Posted ethics policies. Sometimes employees just need to know what constitutes theft, and what behaviors management will or will not tolerate. Making sure that everyone is informed beforehand can prevent misunderstandings and, if litigation ensues, may provide a stronger defense for termination actions.

• Routine audits. If staff know that their work will be reviewed, inventory will be counted, and accounting records studied by someone outside their department, they may hesitate to steal assets or revise journal entries inappropriately.

• Reduced opportunities. Alternating duties among departments is another way to cut down on employee theft. Knowing that someone else will take over his or her work may act as a deterrent when the temptation strikes. For years, banks have required employees to take vacations. Why? So their duties can be performed and their records reviewed by others. Technology can also help. Surveillance cameras, for example, can be pointed at cash registers and placed throughout inventory storage areas. Delivery receiving systems and merchandise security tags also have been used to reduce theft at small businesses.

• Tone at the top. All of the above measures may fail if employees perceive that management is not averse to conning customers, ripping off suppliers, or stealing business assets when no one's looking. A zero tolerance policy for fraud must begin in the firm's executive office.

aconner@atconnercpa.com

Give your graduate some financial lessons

It's unfortunate, but many schools — including institutions of higher learning — spend little time educating their charges about the fundamentals of personal finance. Some kids view credit cards and loans as pipelines to free cash. Some never learn to balance a checkbook. Others consider saving for the future as a drag on today's fun and a waste of perfectly good pizza money. All too many make poor choices in their twenties and thirties, then look back with regret from the vantage point of middle age, wishing they had saved more and spent less.
If your son or daughter will graduate this spring, why not give a graduation gift that keeps on giving? Financial wisdom. To launch the discussion, consider the following three topics:

• Avoid debt if you can. Buying things on credit — whether you're purchasing a car, a house, a vacation, or an education — generally costs more than if you paid for the same item with cash. In the case of larger items, you could end up spending many times more. Cash is king. Many sellers provide discounts to buyers who pay cash. If at all possible, buy stuff with money that's already in your bank account. If you must take on debt, negotiate the lowest interest rate and shortest loan terms you can, assuming you can afford the monthly payments. To avoid accruing interest, pay off credit cards each month. Minimum and "interest-only" payments are the enemy.

• Know what you're spending. Track your expenses for a month or two. You might be shocked. Morning lattes, restaurant meals, impulse purchases at the local department store — all these can drain your finances almost without your awareness. Learn to live within a budget. Prioritize. Be an exception to the rule.

• Save; then save some more. Unless you want to depend on social security in your old age, it's wise to start saving early. The sooner you start, the less you'll need to set aside over time. Be sure to contribute to your company's 401(k) plan if it's offered. When you get raises or cost of living adjustments, increase your contribution percentage. Consider setting aside some of your income in a Roth or traditional IRA as well, and resist the temptation to withdraw money from retirement accounts too soon.

Develop habits of financial discipline now, and reap dividends in the future.

aconner@atconnercpa.com