Employee Dishonesty Can Create a Need for the Best Policy
Company X has been an established business for thirty years, expanding from a small operation to a more modern business, employing more employees and adding more divisions. Now, Company X has filed for Chapter 11 bankruptcy protection as they fight to save their business. Why? A trusted employee pled guilty to grand larceny, tax fraud and forgery after embezzling a substantial amount of money while employed at the company.
“These kinds of stories seem to pop up quite frequently,” says John Kerin, Vice President at Rose & Kiernan, Inc. “The types of businesses and organizations affected have ranged from youth sports leagues to funeral homes to volunteer emergency services – pretty much any business you can think of.”
Indeed, every business is vulnerable to the threat of dishonest employees. According to Statistic Brain, over $50 billion is stolen by employees annually from U.S. businesses. Seventy-five percent of employees have stolen at least once from their employers with 37.5% stealing at least twice.
Employees commit fraud due to a range of factors including, but not limited to, pressure (financial difficulty), rationalization (thinking he/she deserves it) and opportunity (access to funds). Many thefts are committed by those in the finance/accounting function, as was the case with Company X.
“Good accounting controls seem second nature to us as we work in the financial industry, but they can be sorely lacking at even some large and otherwise sophisticated organizations,” says Kerin.
It can be difficult for business owners to spot an embezzler. On average, fraud lasts about two years before detected. In the case of Company X, the employee falsified and cashed multiple checks for varying amounts and doctored company business records to cover tracks.
It is important to protect your business against employee theft. Exposure is much larger than most companies would want to believe. Business insurance is the easiest and smartest way to protect against employee dishonesty, theft, and fraud. Controls are fairly easy to implement and coverage is readily available.
To get in touch about business insurance, please click here or contact us at 800-242-2433. Stay tuned as we talk about ways to protect your business against fraud.