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The Numbers Behind Employee Theft

*This article previously appeared in the Reynolds and Reynolds FUEL monthly newsletter*

By Scott Worthington

A lot of dealers think “Employee theft won’t happen to me” or, “I trust my employees.” But the numbers around employee theft tell a different story.

There was an article in Automotive News about a dealer who lost nearly $2 million to embezzlement from his controller. How common is that?

According to the Association of Certified Fraud Examiners, 88% of businesses who experience theft or embezzlement don’t get all their money back. They never see that money again. As a matter of fact, 1 in 4 theft cases resulted in losses of $1 million or more. Furthermore, 51 percent of dealers have confirmed they experienced theft or know a dealer who has. What’s more disconcerting is the 49 percent who think there is no embezzlement at their dealership. But how can you know for sure?

When you leave your house in the morning, do you lock the door? Does that mean you don’t live in a safe neighborhood? No. It just means you’re being cautious and reducing the risk that someone will come into your house and rob you. We think of theft as a burglar in a black mask, breaking in from the outside, when more often than not a trusted employee you consider a friend, could be responsible for the biggest losses. With a quick internet search, you can find several stories of theft involving employees dealers trusted. In one, the dealer expressed how devastated he was about the situation, but what bothered him most was the mental and emotional drain knowing he trusted someone who took advantage of him.

You can’t be everywhere all the time. Hiring the “right” people isn’t enough either. There needs to be a better way to check for possible suspicious activity. You may be thinking, “That’s why I pay a CPA.” However, you might be surprised to learn CPAs don’t actively look for embezzlement. They ensure your dealership is using generally accepted accounting procedures. You could hire an auditor if you suspect something is going on but on average, dealership theft takes 18 months to find.  In total, it could be hundreds of thousands – maybe millions – before you find the theft.

To ensure your dealership is reducing your risk of theft, you need a dealership-wide monitoring solution that constantly analyzes system data for unethical business activities. This system should monitor your day-to-day operations and alert you when suspicious activity has been found.

How much will it take before you lock your dealership’s doors?

About the Author

With over 26 years of experience with Reynolds, Scott Worthington started as an ERA® trainer in 1991. His other roles included being an original member of the Reynolds Consulting Group, running the Service Readiness organization, Marketing Director, and ERA Solutions Executive. Currently Scott is Director of Product Planning responsible for the ERA-IGNITE and POWER platforms, Business Office applications, Data Archiving, Reporting and Analytic Solutions, and ReyPAY®.

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