Automation's Role in Employee Theft

October 1, 2009

It's not an easy thing to talk about even though it's been several years and I've shared the story many times.

I'm still embarrassed and feel guilty that I didn't have a better system in place to see the warning signs sooner. I had been in business about five years. We just opened our third location, and I was keeping myself busy tending to getting it off to a good start. Cindee had worked for me over the course of four years. Working side by side with someone for that many years, you tend to feel as though they are part of the family. We attended social and family functions and our children often played together. She was a friend, or so I thought.

Since the day I opened my agency, we had used handwritten receipts. It was a system I had become accustomed to from the time I started my career in the insurance industry. But is was that manual process that allowed her the freedom she needed to forge the books and pocket my customer's premiums.

I had made two fatal errors: I put too much trust in her, and I did not utilize my agency management system to its fullest extent.

I was aware my agency management system had a way to issue customer receipts and also a way to reconcile deposits, but I was too busy to sit down and take the time to learn the system and to develop a new workflow process. If things aren't 'broke', why fix them...right? Wrong. Of course, when I caught on, Cindee was fired and later prosecuted. Now I had to set about making things right for my clients and for my agency.

It took about six months to do a complete audit and come up with an estimate of how much damage was actually done. In the end, I was able to identify that one-hundred of my customers had been affected. It certainly could have been more.

It took a lot less time to learn the accounting features in my agency management system and to develop new procedures for handling customer premiums.

First and foremost, I developed a written policy for employees to follow when handling monetary transactions. The key points of that policy included

All monetary transactions, Customer Premiums, Commissions, etc would be recorded in the agency management system.
At the end of each day, every employee was required to balance against their Daily Transaction Report. With this process now being automated, it just took a few minutes out of the day to complete.
As long as everything was in balance, the money and the Daily Transaction Report was turned into the Office Manager to be verified.
If things didn't balance, the bookkeeper and/or agency principal was to be notified immediately, prior to anyone leaving for the day.
A separate employee was charged with reconciling the bank statement.
Surprise audits were made randomly and employees were made aware they were happening.

There is no fool-proof method to avoid employee theft. However, after I made full use of my agency management's accounting features, it was enough to deter future employees from following in her footsteps.

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