Eighty percent of embezzlement occurs in small businesses with fewer than 150 employees. Thirty percent of affected companies close after discovering the theft. The average loss exceeds $120,000. This is not a problem for other businesses—it is a problem for yours.
The Fraud Triangle
On The Buck Stops Here podcast, David Maples interviews Debra Dalgo, founder of Embezzlement U, who explains criminologist Dr. Donald Cressey’s framework for understanding why employees steal:
1. Opportunity
Access to company funds without oversight. The trusted bookkeeper who handles everything. The long-term employee no one thinks to monitor. The “we’re like family” culture that eliminates accountability.
2. Pressure
Financial stress, addictions, or desire for lifestyle improvements. Medical bills. Gambling debts. A spouse who spends more than the household earns. The pressure does not have to be dramatic—it just has to exceed the employee’s ability to cope.
3. Rationalization
“I’ll pay it back.” “They owe me for all my hard work.” “They’ll never miss it.” “It’s a loan, not theft.” The mental gymnastics that allow otherwise decent people to steal from their employers.
Remove any one element, and embezzlement becomes much less likely. Remove opportunity, and the other factors do not matter.
The 10-80-10 Rule
Dalgo presents a sobering framework for understanding your workforce:
- 10%: Highly ethical employees who will not steal regardless of opportunity
- 80%: Situational employees who could steal under the right circumstances
- 10%: Serial embezzlers who steal whenever possible
The vast majority of your employees are not angels or criminals—they are human beings who might make terrible decisions if you give them the opportunity and the pressure aligns.
The Devastating Numbers
- Average embezzlement loss: over $120,000
- Cases involving $500,000-$1 million: 25-30%
- Small businesses that close after discovery: 30%
This is not petty theft. This is business-ending theft.
Prevention Strategies That Work
Implement Internal Controls
No single person should control an entire financial process. Separate the person who writes checks from the person who reconciles accounts.
Rotate Duties
Periodically shift responsibilities among accounting roles. Embezzlement schemes often require consistent access over time.
Maintain Visible Oversight
Perpetrators do not steal if they believe detection is certain. Regular review by ownership or designated supervisors—and making employees aware they are being monitored—dramatically reduces risk.
Screen Before Hiring
Proper pre-employment screening can identify serial embezzlers before they join your company. Background checks are not optional for financial roles.
The Action Plan
- Establish preventative measures today: Embezzlement is inevitable without safeguards
- Educate trusted employees: Show them the consequences of financial crime
- Create accountability structures: No one operates without oversight
- Review regularly: Quarterly audits of financial processes
The elephant in the room is that your trusted employees could steal from you—and without proper controls, eventually someone will.
This article is based on Season 2, Episode 3 of The Buck Stops Here podcast: “The Elephant in the Room” featuring Debra Dalgo.