loader

What You Need to Know about Embezzlement and How Can You Protect Your Business from It?

What You Need to Know about Embezzlement and How Can You Protect Your Business from It?

Nov 30, 2022

Business Insurance

Embezzlement occurs when employees or trusted business parties steal from the company. Typically, an employee (or someone connected to the business) may use company cash improperly to make a profit. Sometimes, even if you take care to only hire the brightest people, not everything will go as planned. Let's examine some strategies for defending your business from fraud.

The Cost of Embezzlement

The majority of embezzlement cases occur in the financial, insurance, and manufacturing sectors, and the average damage is around $175,000. Even with such high stakes, a significant portion of embezzlement cases goes unreported. Moreover, most first-time offenders aren't detected by background checks.

Common Ways That Embezzlement Occurs

Some common back-office embezzlement schemes include:

  1. Billing for non-existent goods or services
  2. Creating fake vendors
  3. Writing checks to dummy businesses
  4. Taking kickbacks from vendors

Why Does This Happen?

Unlike common larceny or burglary, embezzlement necessitates membership in an organization and a position of relative trust. Sometimes the absence of supervision might give one the impression that they are invulnerable, which makes them more eager to take risks.

Many embezzlers persuade themselves that the firm owes them something as a result of their years of dedication and devotion, or they make a commitment to themselves that the embezzlement will only be a short-term solution to their difficulties and that they would return the money before it is lost. Further, they often occur after an employee has held a senior position within a company for a while.

Preventing and Protecting Your Business

  1. Employ Checks and Balances:

    It is always advised to do routine internal reviews of the business's finances. Random audits or yearly book audits by a third party demonstrate to staff that you are serious about preventing fraud and discouraging would-be criminals. Additionally, verify for any missing documentation and confirm that all payment amounts correspond to all invoices.

  2. Practicing Web Awareness:

    Never skimp on cyber security. The most recent firewall and antivirus programs should be installed on every device. Be wary of "phishing" attempts that aim to steal sensitive data from you or your staff. These typically come in the form of an email that seems to be from a bank or other service provider but is actually fraudulent.

  3. Increased Security:

    Your checks, credit card data, and mail are all targets for theft by employees and others. Printed bank accounts and other delicate documents ought to be destroyed or kept in a safe place. Keep in mind that most financial institutions now allow you to completely opt-out of receiving print statements.

Crime and Fidelity Insurance

Taking measures to ensure your employees are the best and to prevent any criminal activity is essential for a company. Despite this, no system is foolproof. A crime and fidelity insurance policy, on the other hand, can assist you in recovering from embezzlement. The types of coverage offered by this type of insurance include:

  1. Embezzlement
  2. Loss due to robbery
  3. Fake or padded invoices
  4. Counterfeiting and forgery
  5. Theft committed by board and committee members, volunteers, and company officers.

Getting Reimbursed

The procedure for filing a claim with crime and fidelity insurance is rather straightforward. First, the insured business must take swift disciplinary action against the employee and immediately notify the insurance provider of the claim incident (based on the situation). The claim will be refused or authorized based on a forensic audit, provided that the insured company provides the necessary evidence.

Consult Kneller Insurance Agency to Cover Your Business Against Embezzlement

Make sure your business is capable of recovering if a trusted employee steals from you. To explore your business's needs for crime and fidelity insurance, contact professionals at Kneller Insurance Agency. Our team of experienced and expert insurance agents can help create a customized coverage plan to meet your business needs.

Is a Leaky Washing Machine Covered by My Homeowners Insurance?
Is a Leaky Washing Machine Covered by My Homeowners Insurance?
Can Your Renters Insurance Cover Pet Damage?
Can Your Renters Insurance Cover Pet Damage?
How Can You Properly Insure Your Drone Business?
How Can You Properly Insure Your Drone Business?
Is Disability Covered by Term Life Insurance?
Is Disability Covered by Term Life Insurance?
Can a Car Insurance Policy Cover an Ambulance Ride?
Can a Car Insurance Policy Cover an Ambulance Ride?