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Embezzlement: How to Catch A Thief (Part 1)

White Law Office, Co. > Business Law  > Embezzlement: How to Catch A Thief (Part 1)

Embezzlement: How to Catch A Thief (Part 1)

If you are a business owner, how do you know if the person in charge of the books is not skimming off the top? What checks and balances do you have in place to ensure more than one person is looking at the financials? It should be an area that business owners review regularly but often times it’s easy to get caught up in the day-to-day operations of the business. Things like the bank reconciliation statements and cash flow statements get put on the back burner for review at a later date.

So what exactly is embezzlement? Embezzlement is the act of withholding assets for the purpose of conversion of such assets, by one or more persons to whom the assets were entrusted, either to be held or to be used for specific purposes. Embezzlement is a type of financial fraud. It’s an employee who has taken it upon themselves to dictate how company money is spent and who feels a sense of entitlement. It’s an abuse of power and the trust that the employee has been given. Let’s start looking at ways to mitigate the chances of an employee embezzling money and look at potential red-flags.

There are various studies done on an annual basis to determine the effects of embezzlement. One of the main things business owners can do to prevent embezzlement is getting to know their employees and looking for different characteristics as described below.

The 2018 Hiscox Embezzlement Study states that an embezzler may have the following characteristics or traits:

  • Intelligent and curious: Embezzlers often pick things up quickly and are eager to know how everything in the office works. Once they learn the processes, they manipulate them for their own gain.
  • Extravagant: Embezzlers will often flaunt their wealth, so watch for employees who are clearly living a lifestyle that is out of proportion to their salary.
  • Egotistical risk-taker: Embezzlers often are rule-breakers in and out of work life – from speeding tickets to overusing ‘sick time.’
  • Diligent and ambitious: An embezzler may come in early and leave late, and never take vacations. This can appear to be dedication to the company, but in fact, it is an effort to keep from being found out.
  • Disgruntled: An employee who feels they are being treated unfairly may be tempted to ‘even the score.’ They may be unable to relax or may experience severe changes in behavior.


As a business owner, there are some easy steps you can take to help defray embezzlement opportunities that do not require a lot of time. Some of those things include:

  • Have an outside party review bank statements and reconciliations.
  • Have your accountant review the audit log in QuickBooks or QuickBooks online to see if transactions are being altered.
  • Make sure employees are going on vacation.
  • Review your cash flow statements and other financial statements and if things do not add-up, talk to your book-keeper, CFO, or person in charge of the finances and start asking questions.
  • Create a system that requires more than one person to be involved in anything money related. i.e. bill payments, check requests, invoices, deposits, etc.
  • Have the bank statements and reconciliation reports for your operating account sent to you every month. You can review them as needed and this helps keep people accountable.

There is no fool-proof plan to ensure that no one will ever embezzle. These are just ways to help deter someone from doing so. Our hope is that business owners never find themselves in a situation where they are now seeking legal assistance because someone has taken advantage of them.

In Part 2 of this series, our Senior Partner, Thomas White will explain what happens when a thief gets caught.

Irene Burgett

Chief Financial Officer

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