There is a hidden risk facing small businesses across the country that often goes unnoticed until it suddenly rips through a firm's finances: employee theft. It's a crime that is costing U.S. businesses $50 billion annually, according to Statistic Brain.
Matt Ham can attest to that. He has had two run-ins with thefts by employees at his small business, Computer Repair Doctor, which has eight stores in Florida, Ohio and South Carolina, which collectively totals 30 employees.
At a store in Florida, two employees were caught stealing parts from inventory and skimming cash about a year and half ago, he said. After a thorough investigation, Ham sat them down with his attorney and they came up with a plan for restitution. Both employees had to pay back the thousands of dollars they stole. The chain has now put more safeguards in place, such as better inventory controls and a strict cash-counting process.
Then, at LaptopMD, a store in New York City that his firm runs on behalf of another company, Ham said an employee misused the company's Amazon Services account by changing it to his personal account. "All of the funds we were charging customers kept getting redirected into his personal account," said Ham, claiming that the employee had also started a side business and used employees at the store to perform work for it without their knowledge. Fortunately, he said, the situation was discovered within two weeks and the company currently has filed embezzlement charges against the employee.
Ham isn't alone in his travails. A new study by Hiscox, a global specialist insurer, found that U.S. businesses affected by employee theft lost an average of $1.13 million in 2016. Small and midsize businesses were hit disproportionately, representing 68 percent of the cases. Their median loss last year was $289,864.
Often, the employees who embezzle are trusted members of a company's team. "It can be incredibly devastating to find out they have been ripping you off," said Doug Karpp, crime and fidelity product head at Hiscox.