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10 Ways to Safeguard Your Business from Employee Theft

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If you think your business is safe from internal theft because you’re a small business, think again. According to the Association of Certified Fraud Examiners, small organizations are victims of fraud more than larger ones. Much of that stems from the fact that larger organizations have more resources to put fraud protection programs in place, while small businesses can be vulnerable.

Employee theft or embezzlement could come in the form of manipulating expense reports, stealing supplies or equipment, or accessing private company information from computer files. All of these are serious offenses, so how can you prevent theft from occurring in your workplace? We are not lawyers, human resources professionals or security consultants, and what I’m saying is for general information only and is not to be construed as legal advice, but here are some things to consider when it comes to safeguarding your materials and information.

  1. Hire honest workers. While all companies strive to do this, sometimes it’s not that easy. Before you hire, conduct pre-employment background checks. This would uncover criminal activity, lawsuits, and serious driving violations that could raise flags if found. You should also confirm education and past employment. (Note: Members of GAF’s Certified Contractor Program have special access to a background screening service.)
  2. Create a good work environment. A fair company that has a clear organization with policies and procedures in place, open communication between business levels, and employee recognition can help reduce theft.
  3. Set up controls. Have a system of checks and balances and authorization for financial transactions. Make sure every transaction is properly recorded.
  4. Protect documents. Shred sensitive materials, lock file cabinets, and don’t leave important documents lying around. Use the Cloud to back-up your data. It allows access anywhere and typically has better security controls that small businesses can provide.
  5. Create an anonymous reporting system. Encourage employees to act as whistleblowers and anonymously report any violations they witness.
  6. Audit yourself. While regular audits are needed, unscheduled ones can point out issues before they otherwise would have become apparent.
  7. Look for signs. Employees who are more apt to commit fraud typically don’t feel appreciated, think management is unfair, and feel that they are owed something. Other signs include changes in behavior, debt, missing records, and working alone or late. While these aren’t telltale signs, they are ones you should monitor.
  8. Investigate incidents immediately. Reduce even more losses by looking into incidents right away before they escalate.
  9. Manage inventory and supplies. Keep track of materials used either by computer or a designated person or use RFID tags to track tools. Businesses can also install security cameras to monitor materials.
  10. Be a good leader. Owners need to set an example by also following the rules and being held accountable for their actions.

If you do suspect fraud, accumulate your evidence and contact the authorities.

Read More in the Building Business Series:

5 Tips for Dealing with Copycat Competitors
How to Give Mind-Blowing Presentations to Help You Sell More
How Your Business Can Make a Great First Impression
5 Ways to Beat the Competition



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  1. John McLellan

    I like the idea of anonymous reporting by employees. We have had two occasions in the last 20 years where dishonest employees were fired. After that, other employees came forward to voice concerns that they had had about those employees previously. If only there was a way we could act on suspicions earlier and reduced our losses. I’ll take an unskilled honest person over dishonest tradesmen any day. John McLellan

  2. Greard

    Well written article with some good tips the most important point as you say is to do the checks. I run a small family manufacturing business in Australia and have been lucky enough to have a good referral system from friends and family for finding workers as my business is seasonal .As yet I have not had any problems.


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