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An employee stole $230k from my company: Here are 3 things I learned about people & business

An eye-opening story of an employee's $230k embezzlement. Learn valuable lessons for managing people and running a successful business.
An employee stole $230k from my company: Here are 3 things I learned about people & business
Photo by Charles Forerunner / Unsplash

Meet Alejandro. He embezzled more than $230,000 from my company BestSelf Co.

I’m not going to dwell on the details. If you’re curious, I made a video breaking down how it all happened.

What I haven’t written about are the lessons I learned.

Here are 3 things you can learn from my [awful] experience:

    1. Realize you’re not invincible
    2. Trust but verify your team
    3. Stay on your toes

1. Realize you’re not invincible

I thought I was: That could never happen to me. Why would anyone want to steal from me? Aren’t there bigger fish to fry?

But the sad truth is that you’re not invincible. And you’re just as likely to be taken advantage of as I was.

In fact, fraud and other white-collar crimes cost US organizations more than $400 billion every year. And what’s scary is the most costly abuses occur not in large organizations but in companies with fewer than 100 employees.

As you and your company get more attention, people like Alejandro will seek you out and try to exploit you.

So, no, you’re not invincible. In some cases, you may even be a target.

Also more often than not, the theft will come from someone on the inside — which is the hardest one to find.

2. Trust but verify your team

Whenever I tell this story, people are baffled a teammate could steal a quarter of a million dollars from us.

It’s important to trust your teammates and give them the benefit of the doubt. Hell, positive intent was one of our core values.

A company that operates under a preconception that employees are criminals? No employee in their right mind would tolerate that atmosphere. Especially in 2023.

But while it’s important to trust them, you also have to verify their actions and ensure that everything they do is honest and up to your company’s standards.

This doesn’t mean micromanaging them. But conduct regular financial checks to ensure your team is being transparent and honest.

3. Stay on your toes

Embezzlement and other forms of financial fraud are hard to detect, especially if the fraudster is someone you trust.

Stay vigilant. Keep an eye out for any red flags. Maybe regular training for your team on financial fraud and how to prevent it?

Again, this can happen to you.

Tip: Do anything you can to avoid hiring the wrong folks, losing money to criminals, and having to litigate to get it back. It was hell.

In this in-depth essay, I talk about three main guardrails I’d recommend to prevent stuff like this from ever happening in your company:

    1. More robust inventory management — Our numbers were easily fudge-able. We were a small company at the time, so I didn’t like to micromanage my team. I trusted them to do the right thing – even if the occasional mistake was made. $230k embezzlement isn’t an oopsie.
    2. More oversight on credit card charges — This is a long story involving the relationship with my ex-business partner. Just make sure you have better eyes on how your company credit cards are being spent and if any suspicious trends can be spotted. The next tip should help in this department.
    3. Financial watchmen — We had a bookkeeper and executive who were not doing their job of watching over our finances and inventory levels. A few weeks before we discovered the crime, we hired some third-party financial consultants to advise us. Let’s just say – The fraud would have been uncovered much sooner had we found these experts faster.

If you suspect that something is wrong, do NOT be afraid to ask for help. Reach out to an advisor or get legal counsel to help you navigate the situation.

I went full Sherlock mode, but I wouldn’t recommend that for everyone. You have a business to run.

I hope this helps more entrepreneurs avoid the fate that we suffered. While I’m glad we finally found the culprit and he got what he deserved, I wouldn’t wish that process on anyone.

It’s best to avoid it from the start:

    1. Realize you’re not invincible
    2. Trust but verify your team
    3. Remain vigilant

Let me know if you’ve experienced anything like this. Or if you have any questions to help you handle a similar situation.