How to Prove Embezzlement in Small Businesses

Business owners are well aware that one of the costs of doing business is that, at some point, it’s a real possibility that staff will steal from the company. In the vast majority of cases, these thefts take very minor forms, such as taking home office supplies or not paying for meals.

There are some circumstances, however, in which the theft might take a more sinister form, including siphoning off money in an embezzlement scheme; therefore, it’s important for business owners to be aware of some of the warning signs of embezzlement in small businesses.

Here are just a few examples of some of these signs and how to prove embezzlement is occurring:

  • Employees suddenly being over-protective of their work: Have you noticed any of your employees acting strangely for unexplained reasons? Perhaps they’re insisting on working alone more frequently, or they’re getting unusually defensive regarding financial issues or other questions you have about their work. They might go so far as to minimize or refuse access to certain records. These could be warning signs that a person is trying to cover their tracks in an embezzlement scheme.
  • Sudden changes in financial metrics: You might notice unexplained shifts in some of your financial metrics, including more past-due accounts, decreased collections, difficulty paying expenses on time (with no real explanation) and a variety of other issues that could indicate money isn’t getting where it needs to go.
  • Signs of dissatisfied employees: If you start to get the sense that you have dissatisfied employees (especially employees that feel as though they’re being mistreated or neglected), this is something you’ll need to address quickly. Dissatisfied employees are more likely to commit embezzlement because their feelings of mistreatment are what they use to justify their theft. If you create a high-quality work environment and company culture, your employees will have less reason to want to steal from you.
  • Issues with financial records: Do you suddenly have missing receipts, corrupted files or damaged register tapes? These could all be signs that you have an employee attempting to siphon off money for their own purposes. These problems could simply be cover-ups for their actions.
  • Signs of financial problems: Carefully watch your employees, and if any of them are going through difficult times, see how you can help them. Employees with gambling or drug problems, mortgage problems, massive amounts of debt or even new children might find themselves in difficult financial circumstances, which increases the potential for future embezzlement. Create a supportive environment, and pay your people well—this will significantly reduce the potential for future embezzlement.

These are just a few examples of some of the potential signs or precursors to embezzlement in a business setting. If you’re interested in learning more about how to prove embezzlement in small businesses, reach out to the team at Medina & Company Consulting, Inc., and we will be happy to provide you with further assistance. We look forward to scheduling a consultation with you soon.