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12 ways to prevent embezzlement


Two out of every five small businesses are victims of employee embezzlement, and most of these crimes are perpetrated by employees who had been with the company one to five years, have a college degree, and have access to the company’s accounting records.

Atlanta-Nearly half of all ODs may be victims of embezzlement.

Two out of every five small businesses are victims of employee embezzlement, and most of these crimes are perpetrated by employees who had been with the company one to five years, have a college degree, and have access to the company’s accounting records.

Most small businesses aren't prepared to prevent it, says Adam Parker, OD, in Midlothian, VA. Dr. Parker discussed employee embezzlement at SECO 2017.

While most people think of embezzlement as stolen money, the crime includes a much broader spectrum, Dr. Parker says.

Related: 6 steps to survive a ransomware attack

Embezzlement can be theft of:

• Time. Skipping time for lunch, personal Internet activities such as Facebook

• Property. Taking frames or even office supplies

• Prescription samples. Taking product samples for personal use

• Workers compensation. Feigning injury

All of these amount to some form of financial embezzlement, and the cost is real.

A 2012 Association of Certified Fraud Examiners report found that the median loss to businesses was $140,000. The actual value of the crime changed based on the occupation of the fraudster, with front-line employees accounting for a $60,000 median loss, while executive fraud was as high as $573,000.

The high-dollar figures often lull small business owners into a false sense of security because small businesses typically operate at small enough budget in which such losses would seem immediately apparent. Embezzlement is not as uncommon as some may think, and small businesses-those with 100 employees or less - have been found to be particularly vulnerable to employee fraud.

Related: The benefits of cleaning out your practice

Larger organizations typically have countermeasures in place, such as employee training, tip hotlines, and other methods of discouraging, preventing, or catching fraud. This translates into shorter time spans between the start of a scheme and when the employee is caught.

Small businesses don’t have the same resources to put into fraud prevention.


Stop embezzlers before they begin

One of the most significant challenges in embezzlement prevention is that it’s not something an employer can easily screen for. About 87 percent of all embezzlement is perpetrated by first-time offenders with no prior criminal red flags.

“That’s scary because you can do as many background checks as you want, but 90 percent of the people will be first timers and you’d never know,” Dr. Parker says. “If you Google ‘convicted embezzler,’ they look like you and me. There’s nothing wrong, they don't look any different, they’re just people. People get into situations in which they have an opportunity, and some simply make the wrong choice.”

Optometry practices are particularly prone to the risk of embezzlement. Because such practices deal with many cash transactions and are in health care, the perception is that optometrists have plenty of money to go around.

Most practices also have a high frequency of transactions and a high turnover rate of reception staff and, in particular, staff that handles transactions-a common risk point. These factors, coupled with fairly low levels of pay for such staff, lead to crimes of opportunity.

“Receptionist is one of the hardest jobs, but it’s also one that doesn't pay as much, and those are typically the ones who are stealing from you,” Dr. Parker says.

Related: Falling for an email phishing scam at the office

12 ways to reduce embezzlement risk

While preventing embezzlement may be near impossible, business owners can take steps to reduce risk and create fewer opportunities for fraud to occur.

1. Zero-tolerance policy. Businesses should make it clear that they have a zero-tolerance policy when it comes to embezzlement, Dr. Parker says. That means no prior warnings or second chances after an offense, and employees should sign disclosures that indicate they understand the policy.

2. Personal responsibility. Assign personal, financial responsibility to specific persons for accounting roles and make it clear they are responsible should any money come up missing. This accountability should be in writing and clearly stated before any accounting responsibilities are undertaken.

3. Employee handbook. Maintain and keep updated an employee handbook that clearly states all policies regarding fraud. Ensure each new employee is given a copy and that everyone is updated whenever changes are made.

4. Biometric cash box. Because cash leaves no trace, it's especially easy to steal from a cash box. Biometric cash boxes-ones which require a fingerprint or other biological marker to open-make it easy to know who had access to cash and at what times. Such information can then be compared to balances to help track when money was added or removed.

5. Limit cash. Limit the amount of cash available at any given time to ensure the amount of cash at risk at any given time is minimized.

6. Restrict website access. Time is money. Use routers to block time-wasting websites such as social media or news sites. While some employees need to have access to the Internet, they should not be given carte blanche access.

7. No buddy punching. Give each employee his own PIN or use biometric technology to ensure she is personally clocking in rather than asking colleagues to clock in on her behalf (potentially when she is not actually working).

8. EHR. Use daily electronic health record reports to help compare services performed and amount of money entering financial accounts. If there are discrepancies, chances are there may be electronic financial embezzlement going on.

9. Need-based access. Limit employee access to business operations and systems (such as EHR) to a must-use basis. The more systemic access a person has, the greater the opportunity to identify and exploit weaknesses that rely on systemic vulnerabilities.

10. Cameras. Recordings are one of the best ways to have an ongoing record of the goings-on inside the workplace. Use security cameras over the front desk, optical areas, front door, parking lot (to help tie a face to a documented license plate-which is what allows for prosecution), and other important areas of the business. Record all activity and make it known that everyone is under surveillance.

11. Internal security systems. You can receive text alerts whenever somebody trips a silent alarm placed on doors, cash boxes, or server rooms.

12. Bank and check access. Restrict bank and check card access; only trusted owners should be able to write checks.

While implementing all of these points may be a tall order, especially if fraud prevention is a new endeavor for an office, it’s important to begin somewhere. As systems are implemented, the risk of fraud lowers because opportunities for theft diminish and employees become more aware of the risks of embezzling from the business.

When an owner is unsure if the efforts are working, Dr. Parker recommends hiring professional auditors to check.

“Don’t be afraid to hire professionals to perform audits if you suspect fraud. And if you don’t, forensic professionals can be hired to make sure everything is on the up and up,” Dr. Parker says.

Read more from SECO 2017 in Atlanta, GA here

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