Are you trying to learn more about embezzlement? If yes, you should check out our list here of some examples of embezzlement.
Each year U.S. businesses lose up to $50 billion to employee theft and fraud. That makes embezzlement one of the most common and most devastating business challenges in the business world today.
Embezzlement takes many forms. Through the years, employees have come up with new ways to steal.
The goal of this guide is to help you know some of the most frequent examples of embezzlement. We’ll also show you what you can do to stop employee embezzlement before it destroys your business.
What Is Embezzlement?
Before we discuss some of the common embezzlement examples in business, it’s beneficial to understand the meaning of embezzlement. Simply put, embezzlement refers to when a member of staff in a trusted position steals from your company. Typically, employees steal money or other assets and use it for their own purposes.
It’s a crime to embezzle. Many recent embezzlement cases have led to the prosecution of the perpetrators under state embezzlement laws. Penalties usually involve fines and even jail times.
Examples of Embezzlement
There’s no shortage of embezzlement examples in today’s business world. Below, we look at three of the most prevalent employee embezzlement cases you need to watch out for.
1. Forging Checks
In this type of embezzlement, an employee writes a company check to themselves, then cooks books to conceal the theft. The theft is made easier if your company uses a signature stamp of a senior employee’s signature. It’s like handing your employees a blank check since they can sign checks anytime without your knowledge.
So how do you prevent this type of embezzlement? One way is to separate responsibilities, so one worker can process checks while another reconciles transactions and approves documentation.
2. Cashing Customer Checks
In this instance, a member of staff endorses client checks and cashes them, then keeps the money. The crime could also involve the employee setting up an account using a fictitious name similar to your business to receive electronic payments from your customers.
The best way to counter this crime is to separate functions so that one employee processes payments while another employee reconciles accounting entries. Moreover, implement the necessary controls to track payments at every step.
3. Overbilling Customers
This fraud involves an employee overbilling your customers and keeping the extra money. The employee can then cover it up with fictitious accounting entries.
In some instances, customers are billed the same amount more than once. Other cases involve overbilling a transaction by a small amount for years. It could also include charging customers for items or services that they didn’t purchase.
The surest way to prevent this type of embezzlement is to conduct periodic audits of client billings. Take note of any customer complaints regarding any billing errors and ask for a thorough explanation from the relevant staff on how the errors occurred.
Embezzlement Can Take Its Toll on Your Business
Cases of embezzlement can prove catastrophic to a business, especially where they go unchecked. By being aware of the different examples of embezzlement that are common today, you can implement the necessary measures to control them.