Embezzlement is a specific category of larceny that consists of taking and keeping funds that belong to someone else but that the employee has authorized access to. Such a theft can occur in a variety of settings. Whether the funds in question consist of millions of dollars at a New York investment bank or a few hundred at a local grocery store, employees in a position of trust may, unfortunately, succumb to temptation and cause substantial damage to a business’s bottom line and reputation.
Early warning
Paying attention to certain red flags early on can alert employers to embezzlement before it can do a great deal of harm. While taking caution to the extreme may not make sense, it is always important to remain alert.
Missing or incorrect documentation
Employees who embezzle often falsify or hide records to cover up their transgressions. Thus, irregularities in transaction records or other types of paperwork can point to something a lot worse than mere carelessness. Watch for an ongoing pattern of paper files going missing or becoming “accidentally” destroyed, or of problems with computer files. Other warning signs include discrepancies in documentation or accounts that do not quite add up. Directly reviewing documentation can help reduce the risk of this happening.
Unexplained financial changes
Unexplained alterations in business patterns can also point to an employee siphoning funds. Are you seeing a downward trend in your collection rate? Are your clients inexplicably delaying or decreasing payments? If you are getting calls from vendors about past due accounts, the payment funds may be going astray before reaching them.
Psychological indicators
Sometimes, the signs of potential embezzlement can be more subtle. You may notice that an employee seems unhappy, expressing dissatisfaction about his or her employment terms or feelings of being treated unfairly at work. Sometimes, this combines with financial problems to put an employee at risk for embezzlement. These indicators can be especially important if they represent a change in the employee’s previous attitude.