How to Know Whether Your Business Partner Is Embezzling

by Contributor

Most embezzlers are trusted company employees. Follow these steps to spot them before they run off with your company's assets.

What Constitutes Embezzlement

Understand that in order for the theft to be embezzlement, there must be a relationship of trust between the accused embezzler and the company or agency she was working for.

Understand that in embezzlement cases, the money or property comes into the possession of the person accused of embezzling specifically due to his employment.

Realize that the defendant must have converted the money or property fraudulently for her own use.

Know that the embezzler had to have the intention to deprive the company or owner of the property taken.

Recognize Signs of Embezzlement by Your Business Partner

Note whether your business partner uses company or business accounts for personal expenses. This is among the most common form of embezzlement for people in upper management.

Be suspicious of an unexplained drop in your business' profits, and pay attention to the complaints of customers about changes or errors in billing.

Observe your records to see if they are unorganized or if there are unexplained costs and losses.

Notice whether your business partner works unusually late, on weekends or does not take vacations, and is secretive about what he does during those periods.

Become aware of any changes in your business partner's standard of living or spending habits.

Observe changes in bank deposits or accounts payable and receivable.

Visit the Small Business Administration Web site (see Resources, below) to learn more about taking preventative measures against embezzlement and recognizing the signs.

Prevent Embezzlement in the Future

Perform audits with other members of your business or company to avoid drawing suspicion to yourself.

Divide financial responsibilities between multiple employees. This will help ensure that nobody has sole access to company funds and will increase your chances of catching errors.

Tip

  • check Consider hiring an attorney to gather evidence before accusing anyone of embezzlement. A false accusation can cost you money in a lawsuit and incur defamation charges.

Warning

  • close Do not violate anyone's legal privacy rights when collecting evidence during the investigation. Evidence unlawfully gathered--for instance, by hacking into someone's computer--may be inadmissible in court. Your also cannot search personal property without a warrant.

Items you will need