Thieves are everywhere. Some of them work for you. Most of them for too long.

Reducing employee theft is the fastest way to increase profit because the dollars saved flow straight through to the bottom line.

Why worry about it? Only two percent of all employees who steal in a year are caught. And that low total does not even include theft by vendors, guests and scam artists.

Are small businesses truly more vulnerable? Security experts advise that small business enterprises may be particularly vulnerable to internal theft. Smaller firms often include employees with multiple responsibilities that provide greater opportunity to commit theft and greater means to conceal such actions.

What is the real rate of employee theft? Approximately 40 percent of employees steal at least one item per year. Inventory loss through theft exceeds five percent of the cost of goods sold. 75 percent of business losses are a result of employees. The average dollar loss per employee theft case is $1,762. Employee theft losses, passed on to the consumer, cost each American $400 annually. The U.S. Chamber of Commerce reports that an employee is fifteen times more likely than a non employee to steal from a business.

Why such a focus on employee theft? Internal theft of money or goods from employees is a primary cause of a significant percentage of small business failures. The Department of Commerce estimates that employee theft and embezzlement activities accounted for one out of five business failures, many of which were smaller firms that were unable to weather the erosion that those activities brought to their bottom lines.

“But, we never have employee theft,” many business owners reply. Don’t bet on it. 75 percent of employee-related crimes go unnoticed. 60 percent of all employee theft is for non cash items. There are over 400 known ways that employees can steal from their employers, and new ways are constantly being discovered.

Again, reducing employee theft is the fastest way to increase profit because the dollars saved flow straight through to the bottom line.

The numbers and data around internal theft are almost incomprehensible.

• An overwhelming 79 percent of workers admit they have or would consider stealing from their employers.
• 43 percent of thieves said they do it to get back at their employer.
• Cameras are unlikely to pick up on theft since would-be thieves can stay out of their range.
• 75 percent of all employees steal from their employers at least once throughout their careers.
• At least half of these 75 percent steal multiple times.
• Employee theft accounted for one out of five business failures, many of which were smaller firms that were unable to weather the erosion that those activities brought to their bottom lines.
• Employee theft is estimated to be responsible for 47 percent of store inventory shrinkage.
• The average dollar loss per employee theft case is $1,762 compared to $265 for the average robbery incident.
• 20 percent of your employees will steal from you no matter how well you treat them.
• 60 percent of all employee theft is for non cash item.
• In most cases, employees fail to report thefts by their fellow workers. Most workers who do report illegal activity do so after the suspect is no longer an employee.
• 75 percent of lost small business profits are a result of employees.
• Small business losses due to theft are equal to three percent of total sales.
• Less than ten percent of the employee population is responsible for more than 95 percent of total losses from theft.
• Nearly every business experiences some degree of employee theft.
• Nearly one-third of all bankruptcies are caused by employee theft.

Help keep the money your business makes by keying in on five areas of immediate impact.

First, being forewarned is being forearmed. Focus mainly on internal theft and loss, as opposed to robbery, for a simple reason: it is the most common and most costly. According to a University of Florida 2005 survey, the average dollar loss per internal theft case was $1,762 compared to $265 for the average robbery incident.

There are many classic examples of theft types: employee, vendor, guests, invoicing, scams. Some examples you may have seen or heard of before. Others are so unexpected and brazen, they will shock you.

Second, critique your work staff. Employees who steal from their bosses share a few traits. Ironically, one suspect trait is overzealous work habits. Sometimes someone who seems like a fantastic, almost over cooperative, worker is really just putting on a good show. They are stealing from you.

It frequently happens in smaller operations. They have fewer managers, often just one very overworked owner. Their security systems, not just the cameras, but the systems and habits, are not as developed. Trust in long term, high output employees helps the day-to-day operations. It also tempts honest people into dishonesty. Set responsibility limits that work for your operation.

Also review hiring. They cannot steal your hay from you if you do not hire them.

Third, develop systems and habits. Systems are great. Habits are better.

Keep the safe locked unless you are in it. Never leave the office door open. Common sense logic, right? Great systems, right?

Case scenario, be honest here: what will you do, or your supervisors do, when you are in the back office, counting the safe and the office is 95 degrees, so the door is open and you hear shouting coming from the front of your business? You would, of course, dash up front to quell the commotion. Did you remember to close the safe door? Is the money back inside of it? Did you spin the dial? The office door did close behind you, right? Be honest with yourself.

The unexpected is the rule of small business life. If you make a habit of turning around and checking that the office door closed properly, you would know the answer. It’s sort of like getting into the habit of putting on your seat belt. You just do it.

Keep the barn door locked.

Fourth, spend only what is necessary. A husband came home proud of his purchase of the newest iPod on the market. He was so excited to show it to his wife and to tell her how he saved $40. It cost $349 with accessories. He only paid $309. Perhaps he uses a different kind of math.

Look up “small business security” on the internet. You will see software, cameras, security systems, alarms, cash registers, consulting firms, I.T. groups, and that does not even include the sidebar ads. There’s almost no practical advice to help you keep the hay in the barn. And they all want your money. The point is to keep the hay in the barn, not give it out for what you don’t need. Review the benefits versus costs of various theft deterrents. From video systems to a $9.67 sign, you will have to decide what is right for your business and what you can afford.

Fifth, take action. Arm yourself with the tools to keep the hay in the barn. Remember, the difference between the owner or manager who loses his shirt and the one who doesn’t will be one thing: action. Use what works best for you and your business. Use the tools and tips from this article, and do some reading of your own. Create forms, checklists, posters, reminders and everything you need to plan and implement new security habits.

Keep more profits! Keep the hay in the barn.

Chaz Philips has been an operations manager for small to mid sized firms for over twenty-five years. He is a specialist in small business loss prevention. Chaz helps small business owners with profitable, easy to replicate methods for loss prevention and revenue recapturing.

Chaz is a Program Administrator for U.S.A. On Watch, member of the National Crime Prevention Council, J.E.T. (Journey Expansion Team) Leader for J.R. Inc., and member of the W.C.P.P.A. (Wisconsin Crime prevention Practitioners Association).

His firm, C & D Holdings, provides online products, webinars, live seminars, and one-on-one consulting services.

http://www.KeepMoreProfits.com. (c) All Rights Reserved. Creative Commons Attribution-Noncommercial-No Derivative Works 3.0 United States License. C & D International Holdings, LLC.

Contact information: chaz@keepmoreprofits.com, 262-834-8096