What are the risks and implications of employee theft?

In the multi-residential property business, the movement of money from various sources through a number of bank accounts is often routine. Countless bookkeeping entries, deposits and expense payments (by cash, cheque and credit card) make it difficult for building management to keep an eye on what is going on.

While general ledger imbalances are a typical first sign of something amiss, a shrewd employee can cover up money shuffling for a long enough time to do some serious damage. Catching the culprit can take weeks, months or even years. Once discovered, the offender is generally gone or poor. Prudent business owners have insurance; careless ones receive a very expensive wake-up call. Either way, it’s an embarrassing experience.

Management controls are never perfect but the difference between financial diligence and sloppiness is very real. Service businesses require hands-on management and numerous independently applied financial controls – not always easy for a small operation. Key employees have to be monitored for improprieties. Beware of any employee who doesn’t take a vacation, citing lack of interest  or work responsibilities.

A serious effort to actively manage and control the financial side of a business can lower the risk of employee theft but cannot, unfortunately, make it disappear entirely. Building managers that run a small operation and cannot afford the staff needed to institute independent internal controls should talk to an accountant. For a small business, there is no cheaper and effective business partner than a good accountant.

Andreas Schwartze is president of IMS Insurance Marketing Services Ltd.