YOU ARE HERE: LAT HomeCollections

Small Business | JANE APPLEGATE

When Workers Take More Than Pride From Their Job

July 01, 1998|JANE APPLEGATE

You may love your employees and think they love you, but unfortunately too many business owners learn the hard way that their workers are stealing from them.

"The greatest threat to businesses of all sizes is their own employees," said Mark Simmons, an auditor and accountant in Albany, N.Y., with 20 years experience ferreting out internal business fraud.

Fraud investigators agree business owners lose billions of dollars a year to workers who steal cash or checks, mess up computer systems, abuse credit cards or pilfer and resell equipment. U.S. businesses lost an estimated $1.4 billion to computer theft alone in 1996, according to Safeware, a computer insurance firm in Columbus, Ohio.

"It's a question of not putting employees in the position where they will be tempted or motivated to steal," said Simmons, who developed the following list of personality types to be aware of:

* Someone who is extremely bored with his or her job may be tempted to steal just to break up the routine.

* An inquisitive person who discovers a weakness in your computer system may try to see just how much information he or she can steal.

* A risk taker who gets a thrill by bending the rules and taking chances may steal for fun.

* A person under stress at home, possibly going through a divorce or family illness, may need money or attention.

* A gambler or big spender who needs more money to maintain a luxurious lifestyle is a prime candidate.

* A drug or alcohol abuser whose judgment is impaired may steal too.

"The fraudster can be the CEO, the mail room clerk or anyone in between," Simmons said. "All it takes is opportunity, need and rationalization."


Because many small businesses operate in a casual manner, the owners may be too trusting toward their employees, said Jane Kusic, special projects coordinator for the National White Collar Crime Center in Richmond, Va.

"Business owners often give one person the task of handling the finances, which you should never do," Kusic said, adding that embezzlement is the most prevalent small-business rip-off. No matter how busy you are, you must keep close tabs on your money. (Making deposits and signing checks personally is one way to keep an eye on what's going in and out of your bank account.)

"If you have an internal bookkeeper, there should be an outside accountant," she advised. "There should be at least two people handling the finances, so there are checks and balances."

You may value hard work, but someone who arrives early, stays late and never takes a vacation may be the one person stealing from your business.

"If you are stealing money, you don't want to be out of the office," Kusic explained. "When someone never takes a vacation or sick time, you've go to wonder."

Another way to deter fraud is to have clear job descriptions and duties, according to David Ramirez, president of Business Risks International, a Miami consulting firm. For instance, he said, if one person is responsible for shipping goods, make sure someone else is responsible for generating invoices and dealing with payments.

He contributed these fraud-fighting tips:

* Require proper documentation for all orders and invoices.

* Do background checks on new employees.

* Set up a hotline so employees can anonymously report theft or fraud.

* Keep an eye on your accounts payable and receivable.

* Create a positive work environment.

"Most employees commit fraud because they feel they've been wronged, are not being paid enough or are upset with management," Ramirez said.


Disgruntled or fired employees also pose a risk to your firm, according to security experts. If someone leaves under a cloud, be sure to change all computer passwords and step up your computer security systems, including the installation of anti-virus software.

Forty-nine percent of about 500 companies recently surveyed by the Computer Security Institute for the FBI reported unauthorized use of their computer systems. Seventy-five percent of the companies also reported being a victim of a computer-related crime.

No matter what kind of business you have, be sure to back up your computer files and keep copies off site. If you decide to beef up your security by hiring security guards, make sure you find a reputable company with a program tailored to your business.

"An effective security plan is not just placing a 70-year-old guard at the door, armed with a sign-in book," said Tzachi Weintraub, founder and owner of Security Advisors Inc. in Mt. Kisco, N.Y. "It's a carefully designed combination of manpower, training, equipment and procedures."


Weintraub said the security industry has grown tremendously in recent years, but without much regulation. He said a reputable firm not only will provide a full security audit of your business, but will screen and hire its employees carefully. A good security program also should blend with and not disrupt your day-to-day company operations.

"A security program is like an insurance policy--you hope you'll never need it," Weintraub said, "but you'll sleep better at night knowing you have it."


No matter what kind of business you operate, you'll find some good advice in the current issue of Small Business Success magazine. The magazine, published by Pacific Bell Directory in cooperation with the Small Business Administration, is available free by calling (800) 848-8000. The 96-page issue includes articles about solving the Year 2000 computer bug, Internet retailing and welfare-to-work initiatives.


Research assistance by Robin Wallace. Jane Applegate is author of "201 Great Ideas for Your Small Business," published by Bloomberg Press.

Los Angeles Times Articles