Welcome to Embezzle-Proof Business, a how-to guide on preventing employee theft and what to do if it happens.
OUR GOAL
Preventing employee theft in small businesses and non-profits.
Even though it is a subject most business owners would prefer not to think about, studies have shown that there is a very high incidence of employee theft in small businesses. Amazingly, of the total amount of money stolen by employees from all of the companies in this country combined, from the very largest down to the mom-and-pops, half occurs in businesses with less than 25 employees! Proportionally, small businesses suffer much greater losses than large businesses. Consider the following:
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Surveys show that 75% of employees steal at least once, and many steal repeatedly.
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Given the right circumstances, up to 95% of your employees will steal.
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Studies have shown that 5 - 10% of your employees are constantly looking for opportunities to steal.
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According to the FBI, employee theft is the fastest-growing crime in the US.
It’s time for small business owners to get serious about embezzlement and become proactive in preventing theft.
The reality is that all businesses fall into one of three groups:
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Those that have already been embezzled
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Those that are being embezzled
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Those that will be embezzled
There are several reasons why small business owners are particularly susceptible to employee theft:
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The owners work very closely with their employees and develop trusting relationships, often too trusting.
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Often, owners are so busy getting the business started that they neglect putting proper fraud protections in place.
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Many small business owners lack formal business training.
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Many of the monetary transactions in a small business are handled by employees.
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Rationalization, the process that can make employees feel justified in stealing, occurs more readily and more frequently in small businesses due to the close relationship between owner and employee.
Many business owners rely on their accountant when it comes to fraud prevention. However the typical accounting engagement does not include services related to discovery or prevention of theft. External audits, both expensive and intrusive, can’t be relied upon either, only uncovering fraud schemes about 3% of the time.
Regardless of the reason, you must be careful not to let it become an excuse. The cost to the business is just too high. This table illustrates the shocking monetary losses that occur over the life of the average business.
As you can see from the table, if you are a business owner averaging $200,000 in annual gross revenue, and you run the business for 30 years, you can expect to lose between $300,000 and $480,000 to employee theft. Keep in mind, this loss represents 5 – 8% of your gross income. If you compare the loss to your net income, the percentage is significantly higher and could easily equal 15 – 25% of what you actually take home. Adding insult to injury, you may even have to pay taxes, interest, and penalties on the stolen money! Stopping theft in your business would be similar to having a side gig, only better. You would in effect be giving yourself a significant raise without doing any more work.
There is more at stake though than just the monetary loss. As a result of the lost income, investments in your business such as new equipment, improved or expanded inventory, new facilities and services, or well-deserved employee raises may not be possible. Ultimately, even your retirement plans may have to be modified or postponed. According to those who have been the victim of this crime, having to deal with an employee who is stealing from you can be time-consuming and extremely stressful. In some cases, victims have even had to take extended time away from the business just to deal with the emotional effects and the financial fallout.
You may be aware of the problem and have already taken steps to deal with employee theft. However, judging by the very high percentage of small businesses that continue to experience the financial and emotional damage that employee theft inflicts, many business owners are either unaware of the statistics or, more likely, just choose to ignore them.
ACTUAL CASES
These are actual cases of embezzlement. The amount of money reported as stolen in each case was just what could be proven. In many cases the actual amount was more, and in some cases much more.
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A 43-year-old Fairland, Indiana woman served as bookkeeper for a small business that repaired and refurbished x-ray equipment. In just under 5 years, she took $1.8 million, always leaving just enough to keep the company barely profitable.
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A Fort Collins, Colorado woman stole a total of $215,000 from two different non-profits that she did work for.
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Rev. Samual Ciccolini, aka Father Sam, admitted to embezzling about $1.2 million over a period of at least 4 years from a non-profit organization he had founded.
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A Chatsworth, Georgia woman embezzled $187,000 from the credit union where she worked.
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Ariel Rivera of Lincoln, Nebraska embezzled $136,000 in a 2-year period from Christensen Audiology and Hearing Aid Center where she worked. Rivera is reportedly the daughter of the owner of the business.
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Karen Wright of King William, Virginia pled guilty to embezzling $524,000 from the insurance office where she had worked for over 20 years.
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Errin Leigh Ellzey of Colorado embezzled $232,480 from the lumber company where she was employed. Her scheme lasted almost 2 years. Originally she was suspected of taking approximately $15,000 until further investigation was done.
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Shannon DeMerse, age 41 of Texas, pled guilty to embezzling about $2.4 million from a local apparel shop over a period of 7 years. The clothing shop was co-owned by a member of the Dallas City Council.
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Mark Cherubini of Ohio was sentenced to almost 5 years in prison and ordered to pay restitution after he admitted stealing well over $600,000 from three businesses he worked for. All three businesses were owned by high school friends.
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Tammy Weart of Illinois, an employee of a moving company, stole almost $1.2 million over a 6-year period. The scheme was discovered and reported by a coworker.
If you are still unconvinced, please contact us. We will supply you with cases until you are convinced!
Now for the good news...
Suffering significant monetary losses due to employee theft is absolutely unnecessary. Fraud is not rocket science; most schemes and techniques have been seen before. Usually, problems arise because the right controls are not in place. Very often, the simple controls we will teach you can prevent employee theft from ever happening in the first place.
In a recent three-way conversation with an FBI agent and an IRS agent who are both actively involved in fighting fraud, they reiterated this same theme:
“…most schemes seem obvious and easy to see if anyone is paying attention to the basics and knows what to look for…”
“…many schemes are really straightforward and easy to detect, but nobody is looking in the right place and at the right people…”
“…the business owners don’t want to believe anything is going on; they want to believe that everyone is honest and can be trusted…”
Business owners must realize that being proactive about fraud prevention is critical, and you can’t just sit back and hope that no one is stealing from you. Remember hope is a feeling and trust is an emotion; neither one is a control!
Embezzlement can never be completely eliminated; when an employee takes a personal phone call while “on the clock” or “borrows” a postage stamp from the office, technically they have committed embezzlement. However, our system can quickly and easily eliminate much of the risk. We will teach you what you need to know and do to prevent most employees from even considering stealing from you.
The how-to guide is specifically geared to busy business owners and gets straight to the point teaching you exactly what to do to prevent theft in as little time as possible. Instead of getting into the “whys” of fraud, we deal strictly with the “hows” of fraud prevention. The guide consists of five simple, very specific components that can be integrated into your business quickly and inexpensively. It is designed to “slip into place", causing no disruption to the normal flow of business. It will immediately begin to impact any ongoing schemes and at the same time help prevent new schemes from developing going forward, giving you the opportunity to spend more time focusing on growing your business and less time worrying about theft.
Just as a sudden unexplained drop in income can mean an embezzlement scheme has started, a sudden unexplained jump in income after implementing our system can mean a scheme has just been stopped. Once the system is implemented, if you have an employee who is primarily working just for the embezzlement opportunities, (and some do!) they will usually find a reason to leave within a few months. Conversely, if you have an otherwise good employee who has occasionally been taking advantage of an easy opportunity to steal, there is a good chance they will be “rehabilitated”. The system is inexpensive and simple to integrate into your business and once integrated, requires little or no additional time or extra bookkeeping chores.
As an added bonus, we offer guidance on what to do if you already suspect a fraud scheme and what steps to take immediately if you uncover fraud.
It is obvious to people working in fraud prevention that the chances of a small business being embezzled is extremely high, virtually 100%. Therefore, it is foolish to just hope that maybe it will not happen to you. You must have a fraud prevention system in your business! The alternative is to wait until you suspect or are certain that theft is occurring. Then you will have to hire an attorney who will likely require a forensic audit. Hopefully, this will reveal who has been stealing and the approximate magnitude of the theft, but forensic audits can be expensive and intrusive, and won’t provide any protection against fraud in the future.
If you feel that your business can benefit from a comprehensive fraud prevention strategy, or you just want to be sure you have the proper safeguards in place, this system is for you. Priced at only $19.99, this system can save you thousands of times that amount over the life of your business, and will easily be the smartest financial decision for your business that you will ever make.