Seven Ways to Avoid Employee Fraud

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As evidenced by some of today's biggest headlines, in harsh economic times, white collar crime comes to the fore as thefts that have been going on for a while are exposed, and desperate circumstances drive an increasing number of previously law-abiding citizens to break the law.

Bookstores are no exception to this phenomenon: In December, North Carolina's the News & Observer reported that a former bookkeeper at Quail Ridge Books & Music in Raleigh, North Carolina, had been arrested and charged with embezzling almost $350,000 from the bookstore, and in January Alabama's Press-Register said a bookkeeper at Page and Palette in Fairhope, Alabama, was arrested on charges of embezzling about $50,000 from the bookstore.

Here, thanks to the National Federation of Independent Businesses, BTW presents seven tips to help bookstore owners avoid getting stung by employee fraud.

By Jeffrey Moses

Though employee fraud is one of the most common crimes committed against small businesses, owners and managers of many small companies take few precautions. This is unfortunate because a small-business owner can significantly reduce employee fraud at little or no additional expense to the company. Here are some ways to protect your finances:

  1. Do not allow one employee to handle deposits and check writing. Separating these responsibilities makes it more difficult for a single employee to work out a system that hides funds.
  2. Personally sign every check written and understand each payment. As a company owner, you may want arrange with your bank for certain employees to sign checks up to a designated dollar amount, but require your signature (or a dual signature) on all checks over that amount. Also, you may want to require dual signatures (with yours being one of them) for specific types of payments, such as payroll checks.
  3. Personally review (and perhaps even reconcile) each bank and credit card statement. Some legal experts suggest that you have these mailed to your home. This assures that you have the chance to personally see them firsthand. 
  4. When hiring new employees, run a credit check. The law states that you must reveal to applicants that you are doing this. Employees with financial difficulties are more likely to commit theft and fraud. You could also consider running a complete background check, including a criminal history and driver's license check. Hiring honest employees is the best way to eliminate fraud.
  5. Audit your company's finances at irregular times using an outside accountant. Regular audits may be standard at your firm, but auditing at irregular times will scare off most potential thieves.
  6. Pay employees well for their efforts. An underpaid and overworked employee is much more likely to commit fraud.
  7. Add theft/fraud insurance to your business insurance. The cost is minimal, and it will give you peace of mind.

Reprinted with permission from the National Federation of Independent Business. NFIB is a leading organization representing small and independent businesses. A nonprofit, nonpartisan organization founded in 1943, NFIB represents the consensus views of its members in Washington, D.C., and all 50 state capitals. Visit to learn more.