Dear Professor Bruce:

I own a small business and don't believe my employees are stealing from me. But as my firm grows, I'd like to prevent employee theft, specifically in the accounting and bookkeeping areas. What can I do?

Answer:

You're right to be concerned about employee theft. Employee theft is increasing at an alarming rate. Many times, entrepreneurs are so busy either running their business or trying to grow their business, it's necessary to hand over responsibilities to employees.

According to Mike Rhodes, a partner at New York-based accounting firm Citrin Cooperman & Co., LLC, there are several steps small business owners can take to prevent employee theft.

With the help of your accountant, review how cash receipts, payroll and cash disbursements are handled. Cash is typically a small business owner's most vulnerable asset, since it can be neatly tucked away in a purse or pants pocket. Problems typically arise when one person has sole control over the process of handling revenues and payments. The simple solution is to add another person to the process to create a quick system of checks and balances. Inserting yourself into the process - even if it is simply signing checks - does two things: 1) alerts employees that you're keeping a close watch and 2) allows you to catch any discrepancies. As the business owner, insert yourself somewhere into the process.

Scheduled and unscheduled audits are also helpful in catching employee theft as well as preventing it. Sloppy recordkeeping invites fraud. Frequent audits, however, will ensure that the books are up to date and that "cash in" and "cash out" reconcile.

"While many small businesses foster a sense of family among its owners and employees, it's important to restrict access to crucial information such as bank accounts to your most trusted and senior employees," says Rhodes. "The more people with access to money that goes in and out of a business, the more risk a business owner faces."

When it comes hard goods - whether it be office supplies, equipment, materials or retail items - the use of a surveillance camera can be extremely effective in cutting down employee theft, and helpful in the event of break-ins as well.

Bruce Freeman, owner of a small business and an adjunct business professor at Kean University, is always looking for interesting success stories and lessons learned. Entrepreneurs can e-mail their ideas to Bruce or visit www.smallbusinessprofessor.net.