man holding money

Employee Embezzlement: How It Starts and How to Deal with It

All companies are at risk of embezzlement. Employees can steal assets, money, or properties that the company entrusted them with when they are given the opportunity and condition. Regardless of the type or size of the business, there should always be proactive safeguards taken; otherwise, employee embezzlement can cause havoc on the business relationships.

How Embezzlement in a Business Starts

An embezzlement scenario usually starts when an employer cedes most of the business’ bookkeeping works to a sole, trusted employee. In the growth and success of the business, some employers lack the time to check the usual bookkeeping activities. This can become a breeding ground for embezzlement activity.

Different Forms of Embezzlement

This crime can take on various forms and may involve payment of non-permissible personal expenses, diversion of business funds, or simple stealing of cash deposits. Usually, the employee will cook up the books by recording fraudulent entries on balance sheets to hide the activities. Long-term and substantial embezzlement happens when the employee has access to cash or credit of the company and has the ability to hide their illegal activities on the books.

Red Flags that Point to Embezzlement

man handing money to another manThe first suspicion of stealing in the business is usually based on circumstantial evidence. It may be revealed through a report of another employee or through the conduct of an audit. Some of the red flags that should arouse suspicion include:

  • An employer having issues with bills, invoices, or mail deliveries which are being directed to the employee residence instead of the business office.
  • An employer receiving notices from the Internal Revenue Service or any revenue department regarding non-payment of taxes which the employer believed to have paid.
  • The decrease in cash deposits or any discrepancies in cash deposits.
  • The business struggles with bills payment despite the solid revenue generation.

These signs may not be conclusive, but the presence of any of these scenarios should warrant further investigation to discover its underlying cause. Embezzlement starts to happen when an employee starts hiding and diverting funds and non-payment of bills from the employer.

Internal Investigation for Employee Embezzlement

Suspected employee embezzlement activities should be dealt with confidentiality. It is critical for business owners to reinforce a low-keep to other employees who are aware of the situation. This will prevent exposure to defamation claims and potential tipping off to the wrong party. This is especially true for employers who are not fully aware of the extent of the illegal activities or if there are other conspirators and outsiders involved in the embezzlement.

It is best to discuss matters with your attorney who is an expert in embezzlement cases and bail bonds in Raleigh, North Carolina to ensure that all internal investigation are kept within legal boundaries. You can also seek advice on any legal action that you can take against erring employees and ways to prevent bigger losses from the situation.

Despite the fact that any business can experience employee embezzlement, due diligence and proper oversight of the employer can prevent most instances of this crime.