Perhaps you have heard a story about an employee that has embezzled from a company. Some may shake their heads in disgust and then shrug it off thinking that it will not happen to their company. Others may hope that it never happens to their company, but take no steps to prevent it from happening. Unfortunately, whether you are a small business or a Fortune 500 company, it can happen. The following tips, however, will help prevent an employee from embezzling from a company.
Every disbursement made by a company should be reviewed by the owner of the company. The most effective method of performing this task is to review each disbursement listed on the company’s bank statement and compare them with related invoices or transactions every month.
Review Endorsements on every Check
Endorsements on the back of every check written on behalf of the company should be reviewed to make sure the funds arrived at the intended destination.
Every month, any cash transfer transaction such as 401k, ACH, or tax payments should be reviewed to ensure that each transfer matches with corresponding payments.
All Debits and Credits Should be Entered in the Accounting System
To prevent the possibility of funds from being misappropriated, all debits and credits should be entered into the accounting system. This especially includes small transactions.
All Payables Should be Accurately Tracked in Accounting System
To accurately track invoices or bills that are due during the month, such payments should be entered as an expense opposite (increasing) the payable account, then cash opposite (decreasing) the payable account.
Establish and Enforce Financial Rules
Your company should create an environment of following the financial rules. Any rule infraction should be well documented and thoroughly investigated.
Perform background checks on employees who work with the company’s finances or accounting system to ensure that those employees do not have a history of misconduct.
Enforce Vacation Policy
Mandating a minimum one-week vacation each year for employees will allow a company to check for irregularities in the accounting system. If necessary, a company should block such employees from accessing the company’s computer system while they are on vacation.
If these eight tips are followed, the chances of an employee embezzling from a company will be greatly reduced.
We welcome your calls
As always, we welcome your calls about questions you have. Please do not hesitate to contact us at (402) 330-3060.
Gene M. Eckel
Thompson Law Office, PC, LLO
Direct: (402) 682-7647
Gene Eckel is an attorney at Thompson Law Office, PC, LLO
How may we assist you?
Warning: Electronic messages are not necessarily confidential. Please do not send any message you consider to be confidential or sensitive in nature until you receive information from us on how to encrypt your message. Please be aware that the act of sending electronic mail or messages to Thompson Law Office will not of itself create an attorney-client relationship. Unless you are already a client of our law firm, any electronic communication will not be privileged, and may be disclosed to other persons. The contents of this website are intended for general information and educational purposes and should not be construed as legal advice.