Most business owners never expect employee theft or embezzlement, yet these issues occur more frequently than many realize. The impact on cash flow can be devastating, particularly when trusted employees are involved. Understanding and implementing proper controls is crucial for protecting your business.

Consider this real example: A trusted bookkeeper who handled all financial transactions - from bank deposits and payroll to accounts payable and sales recording - began stealing after personal financial difficulties. Starting with extra payroll checks from a dormant company account, the theft escalated to direct withdrawals from the main business account. The theft was discovered only after significant losses had occurred.

The key to prevention is implementing proper checks and balances. No single employee should control all financial aspects of your business. Separate duties so that different individuals handle different parts of financial transactions. For example, the person who records sales shouldn't also handle bank deposits, and the person who enters bills shouldn't also sign checks.

Regular professional oversight is crucial. Have a qualified financial professional, like a CFO, review your books at least quarterly. This review should include bank reconciliations, payroll records, and unusual transactions. Implement internal controls such as requiring two signatures on checks over certain amounts, regularly reviewing bank statements, and maintaining proper documentation for all transactions.

Create an environment where employees understand that controls exist and are consistently enforced. While trust is important for workplace morale, verify key financial transactions and maintain professional skepticism. Remember, most embezzlement starts small and grows over time as employees test boundaries and find weaknesses in your systems.