Embezzlement is a type of financial fraud that occurs when an employee diverts their employer’s assets for their own personal gain. This occurs when the employee steals assets which include company property, cash, or inventory. This can lead to several problems including loss of revenue, serious legal consequences for the employee, and damage to the company’s reputation. Learning how to spot the signs of embezzlement can help save your business from financial hardships.
The management is being overly secretive about the books.
This includes not providing access to financial records, refusing to provide information about the business’s finances, or hiding financial records from others in the office. If they don’t want anyone else looking at their books, there might be something they’re trying to hide.
If you notice that someone who handles finances is not letting anyone else see what they’re doing, then it could be time to investigate further. They may also refuse to give out documents or records when asked by others in management or HR.
There’s been a sudden reduction in profit.
It’s normal for profit to vary slightly, but if there is a sudden and unexplained reduction in profit, this could be a red flag. Oftentimes, embezzlers will start by withdrawing small amounts at a time, and this sudden reduction could reflect those small funds misappropriated in small increments.
Cash flow has slowed within your organization.
If cash flow has slowed within your organization, this could be a sign of embezzlement. Embezzlers often use their position to authorize payments for their own personal use. They may also receive unauthorized bonuses or other forms of compensation from vendors or clients and redirect these payments into their own accounts.
An employee is living beyond their means.
If an employee suddenly lives above their means with no explanation for how they afford it, this could be a sign of embezzlement. Your employees should be living within their means and shouldn’t have unexplained expenses like luxury items or expensive vacations. If they’re spending beyond their means, then there may be something going on behind the scenes that needs investigating further.
Sudden behavior change from an employee.
If an employee’s behavior has suddenly changed in a negative way, this could be a sign of embezzlement. They may be more secretive than before and spend less time at work. They might also seem nervous about being watched, especially if they have access to money or credit cards.
The best step you can take against embezzlement is to be informed about the warning signs. Take this article as your first step in educating yourself on what to look out for. A little bit of due diligence on your end can go a long way towards protecting your organization.
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