By Joyce M. Rosenberg, AP Business Writer
NEW YORK (AP) — It often starts with a trusted employee who a small business owner would never suspect. Invoices might be forged, or checks might be stolen. By the time the boss catches on, thousands of dollars in cash or inventory have been stolen.
Employee theft or fraud is a big and expensive problem at many small companies. But the pain is often more than monetary. A boss feels a sense of betrayal, anger and shame. And wishes after the fact that he or she hadn't been so blind to what was going on.
A look at the problem, and steps a business can take to try to prevent it:
WHO DOES IT
Lawyers who handle employee theft cases say workers who steal from their companies are usually not the recent hires.
The thief tends to be "the long-term trusted employee who's never had any evidence of (prison) time on their record," said John Palter, an employment attorney with the law firm Riney Palter in Dallas.
"Generally, it takes someone with a high level of access to the various accounting systems and a high level of trust from management to be able to perpetrate the fraud," Palter said. Consider that the thief might be a bookkeeper or controller.
Because of that trust, owners often don't think to check up on their staffers — or even their business partners — and the theft can go undetected for years.
HOW DOES AN EMPLOYEE STEAL
Attorneys say there are several methods that employees tend to use when they steal.
A common one is for an employee to create a fictitious vendor who is paid for goods never received or services never performed. The employee creates an invoice and a check is cut to pay the non-existent vendor. The employee cashes the check.
Another method involves an agreement between the employee and an actual vendor. The vendor agrees to mark up the price charged the company, and after being paid turns over the extra money to the employee. In return for this kickback, the employee promises the vendor that the company will keep doing business with him or her.