As a small business owner you don't have time to watch everything.  Implementing solid procedures can minimize your risk and allow you to monitor instead of micro-manage.

How can you prevent it?
Protect yourself AND your employees

Segregate accounting functions   
   
Use your accounting software and create unique
   users / passwords and change passwords frequently

   Have one employee prepare the checks in the system,
   and someone else reviews and prints them.  Yet another person
   signs them

   Use direct deposit as often as possible for payroll

   With easy online access at financial institutions, reconcile your bank
   accounts weekly or even daily to quickly spot unrecorded transactions

Implementing quality control procedures is for your protection as
well as your employees

What are the clues?

Large expense reports without supporting receipts

 Strong resistance to procedural changes

Odd bank transactions

Undeposited Funds account higher than normal

Unbalanced Petty Cash

Checks "Lost in the mail"

Bank Deposit receipts not matching accounting records

Inventory unaccounted for or accounting system not
reflective of actual inventory

 Financial Statement margins...watch for sudden changes

Employee loans not paid in agreed time frame