How to Prevent Embezzlement in Your Small Business

Embezzlement is a crime which has many victims and it is a crime which has the power and the capability too force a small business to close its doors. such is the height of this danger, as a small business owner you must ensure that you are doing everything possible to prevent the chance of embezzlement taking place.

Sadly, the majority of people who are found guilty of embezzlement, are those who are fiends or trusted colleagues of the owner so you should never take anything for granted. We spoke with Steve Sorensen embezzlement expert, to find out what you can do within your business to prevent this heinous crime.

Background Checks

When you hire new staff you ought to ensure that you are performing full criminal background checks, if someone has embezzled before and got away with it, they can be expected to do so again.

Use a Checking Account

If you use a checking account for all money that comes into the business and for all money which goes out of the business, you can ensure that you are providing a safety net for your business. Checking accounts create a record and a receipt of everything that happens with the business’ finances so even if someone wants to cook the books in the business, they can’t do anything about the entries in your checking account.

Separation of Duties

You should never have the same person in your business dealing with point of sale, cheque writing and  payment approval as this gives them the opportunity to falsify the sale on the whole and could lead to embezzlement. Instead, make sure that you have at least two or three people dealing with each aspect of the sale so that you can be sure that embezzlement is as difficult as possible for anyone who is considering it.


One of the most effective ways to avoid embezzlement is to have regular audits in your business, these should be a mixture of audits by yourself and also audits by a company who has no connection to the business. Financial audits can be performed in a variety of ways, this might be individually checking invoices against account transactions to ensure parity. In the case of a business engaging with securities trading, this might be asking the question ‘what is excessive trading?‘ in the context of the companies trading strategy. A high trade frequency wouldn’t make sense for a company targeting long term holdings, this might indicate a broker is trying to falsely generate a commission by making more trades than they should be. Whilst audits should be regular in terms of how many are carried out, you should always change the time frame of when they happen so that they become irregular in terms of dates or months. The fear of an audit is often more than enough to prevent anyone who has malevolent intentions, from acting upon them.

Expect It

The biggest way in which you can prevent this crime is to be aware of it and expect that it could very well happen to you. If you think in this way then you will be able to ensure that you are doing your due diligence as a business owner and that you are constantly checking all of the financial details around your business as well as being on the watch out for anything awry.

Be aware and be vigilant and if you suspect anything, act on your suspicion straight away.