LA GRANDE — Two Eastern Oregon-based certified public accountants offer their advice to local businesses on how to prevent embezzlement.

Chelsea Hewitt, who works at La Grande’s Connected Professional Accountants LLC, and Kent Bailey, a self-identified “semi-retired” partner of Guyer and Associates in Baker City, said small business owners can establish a system of checks and balances and a couple relatively easy preventative measures to reduce their risk of employee theft.

Warning signs

“The first thing that is a sign is if the business has not had any real cash problems, meaning they have had enough cash to pay their bills when they were due and then suddenly they begin to not be able to pay their bills,” Bailey said.

Hewitt said that oftentimes employees who steal from their employers do so after they have experienced changes in their personal lives — for example, their partner has become ill and medical bills are piling up.

“They’ve justified why they need to borrow this money in their heads. They think that they’re going to pay it back,” she said. “If they have some sort of personal life event going on, that sometimes can be an indicator.”

Hewitt referred to the commonly referenced “fraud triangle” — opportunity (access to business money), motive or pressure (personal life struggles or unexpected expenses) and rationalization (seeing the money taken as a loan or resentment toward the business) — and added that “a time (business owners) could be susceptible” is when a change in key personnel occurs.

How to protect small businesses

Hewitt advised business owners to delegate financial tasks to more than one person so there isn’t one employee solely in charge of things like paying bills, writing out checks for payroll and handling bank statements.

“A really simple control that we suggest that people do is have somebody that’s doing the bank reconciliations be different from the person who opens the bank statement,” she said. “It could be the CEO of the company, or the boss or whatever, they wouldn’t have to know accounting to be able to do that function.”

Bailey said embezzlement is much more common through cash than checks, because check deposits are recorded in bank statements, whereas cash can be pocketed without a paper trail.

To avoid cash being stolen by employees, he recommends recording all types of transactions and installing a camera over cash registers.

“Just putting a camera (over the registers), even if you never look at it, cuts the risk down,” as it will serve as a constant reminder that all cash coming in and out of the till is being monitored, Bailey said.

Hewitt understands how it might be difficult for small private businesses to have many controls, because they most likely will not pay for an audit and don’t have many key personnel to monitor the money. However, she said that review of unopened bank statements by management is one of the most important controls to protect a business from embezzlement.