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.

Disbursement Review

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.

Cash Transfer Review

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.

Background Investigations

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.

Ben Thompson

Ben Thompson

Managing Attorney at Modern Law Firm
Ben Thompson is licensed to practice law in Nebraska and Iowa. His law practice is at the intersection of the land, its stewardship, and justice.

Modern Law Firm is a law firm that helps Nebraskans achieve the American Dream through owning homes, starting businesses, strengthening families, and shaping legacies. Learn more about the firm's general law practice here.
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