I receive daily Google alerts for articles about employees who are caught embezzling. There are a lot of articles. I know that the cases I hear about are a very small percentage of embezzlements that are investigated. I also know that embezzlements that are investigated are a very small percentage of situations that should be investigated
Why? Because business owners don't know what to look for or they don't want to acknowledge the problem.
Most of the cases I hear about or handle personally have one thing in common: an employee who does too much. Many, if not most, small businesses and non-profits become victims of an employee who does too much. They become the victim of 'the employee who does too much' for numerous reasons - my experiences with this problem are discussed below.
1. They can’t afford to hire another employee.
They can’t really afford to lose money to fraud either, but they either don't know any better or they ignore or accept the risk. There is something the business can do when they have an employee who does too much. The owner, executive director, or “management,” should be involved or at least provide knowledgeable oversight for whatever process the employee controls.
2. It hasn’t occurred to them that the employee who does too much would take advantage of her absolute and total control over the cash and accounting process.
I recently spoke to a business owner who found out that her bookkeeper had been stealing from the business for over 15 years. When the bookkeeper was arrested, she confessed. When asked “why?” Her response? “Because it was so easy.” I investigated a physician practice embezzlement. The office manager was the employee who did too much. She was also the physician’s next door neighbor. Trust is not a control, friends.
3. The Ostrich: they really don’t want to know.
Believe it or not, I frequently encounter an ostrich. The employee who does too much does SO much, that if she was caught stealing, the ostrich would have to do something about it. But he doesn’t want any more on his proverbial plate than he has already. He’s convinced himself that, even though she (the employee who does too much) can take lots of money AND cover it up, the business is still making lots of money, so he doesn’t want to rock the boat. But is the business making as much money as he thinks it is??? Owners and managers with little time will convince themselves that the employee who does too much is irreplaceable. Think about the message this sends to anyone who suspects. Fraud prevention starts at the top. Someone needs to put their foot down. But truth can be stranger than fiction.
4. Sometimes, the business is growing so fast, no one has taken the time to stop and think about what everyone is doing.
Especially if everything is getting done. What was once a small business whose owner could provide plenty of detailed oversight is now a bigger company with lots of orders and clients and a once part-time bookkeeper who is now working full-time because she’s become the employee who does too much.
5. Or maybe, the business is growing so fast that the owner suddenly realizes he doesn’t have time to do the bookkeeping.
He wants it off his plate YESTERDAY. So, he hires an accountant. He’s so relieved to quickly find someone familiar with Quickbooks that he fails to check references or do a background check. Yeah…she’s real familiar with Quickbooks.
This list can go on and on. Unfortunately, if the employee who does too much is really good, there won’t be many typical fraud red flags because she’ll be able to fix the accounting records to cover her tracks. If you have an employee who does too much, you will want to look for the following behaviors:
1. Any employee who handles assets – cash, checks, credit cards, receivables, inventory, equipment – who is responsible for more than a couple of steps in the process is an employee who does too much.
2. An employee who does too much becomes very protective of her work, her system, and gets defensive or resistant about making changes or receiving oversight.
3. The employee is coming in very early in the morning and/or staying late, or in any way seems to have more work to do than she should.
4. Changes in the lifestyle or work habits of an employee, especially one who does too much.
5. Any employee who has unrestricted access to your IT system.
6. An employee who does too much who also has personal problems: divorce, a sick family member, personal addiction or a family member with addiction issues, etc.
I realize that all of you on my mailing list have a great internal control system at your business because you read all my newsletters. Right? You are the exception. It’s much more difficult for an employee with limited access and responsibility to embezzle money. So help your friends, clients, and colleagues who are business owners, managers or executives by raising your voice against the employee who does too much (and by sending this post to the unenlightened).