Smart About Money: Is someone you trust embezzling from you?

There are a couple of situations when a local business owner should absolutely take action to determine if someone is abusing your trust and embezzling from your business.

If you have a nagging feeling that someone could be embezzling from you – that something is “off” somehow – chances are your intuition is correct.

If you are 100% sure that’s impossible, it’s even more likely that someone could be embezzling from you. Especially if you have no safeguards in place.

How do I know? Because every time a business owner discovers there’s money missing – sometimes very significant amounts – they always say one of two things. It’s either … “I had a feeling that something was wrong.” Or … “I had complete faith in that person. I can’t believe they were embezzling from me.”

If you do not have polices and safeguards in place to prevent embezzling – if you do not make it clear that you are actively protecting and monitoring your business’s finances – you are putting yourself at risk. Along with the person who may be tempted to embezzle from you. And the “innocent bystander” employees who could wrongly come under suspicion.

What do those policies and safeguards look like? For a business, there’s always room for improvement and different situations require different approaches. But, as a practical matter, here are 5 things you can do. And three very important ones are completely free:

1) Having two employees overseeing each other’s work on any financial transaction generally cuts way back on embezzling. It cuts back on honest mistakes too. Cost? Zero!

2) Limit the number of people who are authorized to sign checks for your company. And the employee who writes the checks should not have signing authority. Cost? Also zero! But it can make all the difference in the world.

3) You should personally receive monthly bank and credit card statements, ideally at an off-site address. And you should review these statements carefully every single month. The less you want to do this, the more it means you should! Cost? Zero!

(If you know you simply can’t or won’t do a monthly statement review, you would be well-advised to work with a local accounting/bookkeeping firm who will review your statements and report back to you.)

4) Arrange for a local accounting firm to do a complete annual audit or – at least! – an annual review or financial statement compilation with an emphasis on uncovering danger areas and/or ongoing fraud.

Some businesses say they can’t afford even a limited review/spot audit. The truth is that if you have employees handling your money, you can’t afford not to do one. Not because your employees are embezzling but so you’re confident they’re not.

5) Join and participate in groups like the excellent Canton Association of Business & Industry or your local Chamber of Commerce. Talk to people in your own industry and others about what “best practices” they use to prevent in-house financial fraud. It’s a great way to come up with practical, easy-to-implement ideas you may not have considered, ideas that could save you hundreds of thousands of dollars … and a lot of regret.

Trust, but verify. As a local business owner, you’re the only one who can do that for your business. And no honest employee will object.

Nick Maffeo is the President & CEO of Canton Co-operative Bank in Canton. “Smart About Money” is a regular column he writes for the Canton Citizen. Have a financial question you’d like to ask? Email to


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