3 Factors That Put Your Company at Risk of Internal Theft
As a business owner or manager, you probably worry about external threats like shoplifting or cyberattacks. But did you know that internal theft may also cause significant losses? In fact, according to Corporate Finance Institute, 38% of inventory shrink can be attributed to shoplifting, with 34.5% being caused by employee theft. Here are three factors that make your business prone to internal theft.
1. Poor Internal Controls
The first big risk factor is poor internal controls. This means your business lacks procedures to prevent theft. For example, you may not require purchase orders or have a clear process for approving invoices. It’s also possible that inventory isn’t tracked properly, so shrinkage goes unnoticed. Without oversight, it’s easy for employees to steal. Fix this issue by implementing tighter financial controls. Make sure purchasing and payments follow a defined workflow. Regularly audit inventory numbers. The more checks and balances you have, the harder it is for theft to occur.
2. High Employee Turnover
Did you know frequent turnover correlates with higher theft rates? As employees come and go, it’s easier for things to slip through the cracks. New hires might not understand policies. And departing staffers may have a “nothing left to lose” attitude if they steal on the way out. Curb turnover by making your company a great long-term fit for staffers. Competitive pay and benefits, training, and growth opportunities encourage retention. Do exit interviews to learn why people leave, and address any fixable issues. Lower turnover reduces internal theft risks.
3. Lack of Background Checks
Finally, failing to screen new hires with background checks is asking for trouble. Someone with a criminal history or past employment theft may repeat those behaviors at your company. And due to negligence in hiring, you won’t know until it’s too late. Stop that from happening by thoroughly vetting applicants. At a minimum, verify work history and check references. For sensitive roles, run criminal and credit checks too. Yes, background checks take time. But it beats learning the hard way that your new controller has embezzlement convictions.
While insider stealing may seem unlikely, it’s a serious threat. Use the tips in this post to minimize risks within your organization. With diligent oversight, engaged employees, and better security measures, you can guard your hard-earned profits. Remember, just because a danger is internal doesn’t mean you can’t get ahead of it. Reach out to us today at Sonitrol to discuss security options that can help to prevent theft, including internal theft.