Small Business Boomers

Some business owners need a sharp kick in the pants before they start paying attention to their business. Case in point: I recently saw an article in a local newspaper (online) in Fort Wayne, Indiana, about an employee in a dental office who embezzled over $200,000 from the doctor.

The two biggest losses any small business faces are customers shoplifting and employee theft. And employee theft is by far the largest. It often goes undetected until too late, as with the case above. Why too late? Well, if the dentist had caught the employee when she owed just a little money, he might have been able to recover it from her. When the employee theft goes on…and on…and on… and amount is huge, as in this case, there is no way the person can repay the debt. In addition, the attorney fees and court costs are an additional loss.

A recent study by the Institute for Corporate Productivity shows that the incidence of employee theft is up in the wake of the economic downturn. Almost a quarter of the responding companies said they had noticed an increase in the numbers of employee thefts. Larger companies may have the resources to monitor and pursue employees who steal, but in smaller companies, it is the owner who must be watchful and vigilant.

As a Baby Boomer in business, you think you’ve seen everything. But people/employees are innovative, and they come up with new and different ways to steal from you. The Wall Street Journal reports that increasingly it is trusted employees who are the most likely to steal. That makes it even more difficult to figure out what is going on. So what are you to do?

A couple of years ago, I wrote an article on this subject for a chiropractic publication. Here are some tips from that article:

1. Cultivate Ethics and Honesty
Tell your employees you expect them to be honest in their employment and let them know you will be watching. It sounds too simple, but many people steal from their employers because they think the boss doesn’t care or isn’t watching. Having a culture of honesty includes your own; if employees see you cutting corners and not dealing honestly with customers, they will be less likely to take you seriously.

2. Pre-screen Employees
You have the right to check references; do it. Ask about previous convictions (you can’t ask about arrests) and do background checks. You can also do polygraph tests as long as you do them with everyone.

3. Divide and Conquer
Divide up duties, particularly those involving cash. The person who writes the checks should not be the same person who reconciles the bank statement. Same with credit card purchases (that’s how the employee at the dental office took a lot of the money). The person who counts the inventory should not be the person who does the shipping. The person who Rotate duties occasionally, so no one can get too comfortable (tell the employees you are “cross-training” them, which you are).

4. Manage By Walking Around
Monitor employee activities. Review your accounting records, bank statements, and credit card statements every month. If you see anything suspicious confront it early. The dentist in Fort Wayne didn’t realize that 3 years of accounting records were missing! And he didn’t keep track of credit card receipts. Remember, it’s often your most trusted employee who is stealing from you.

5. Establish and Enforce Policies
Require all employees to take vacation. I know of one contractor whose bookkeeper refused to take vacations for several years. When she was hospitalized, he found out why; she had been methodically stealing from him. Don’t allow employees to take work home; this is a good way for them to “doctor” the books (pardon the pun).

Tighten cash and credit card policies. Require two signers on checks; require approval on any credit card receipt over a certain amount. Don’t forget, though, that embezzlers often start out small, hoping their theft will be overlooked. Keep track of checks and receipts.

You might also consider purchasing employee theft insurance. But no insurance policy can protect you from your own inattention or stupidity. It is sad that we can’t trust anyone, but we really can’t. Another case: The business owner’s sister-in-law was the one stealing from him.

It is difficult to accept, but true: Steal from me once, shame on you. Steal from me twice, shame on me.

Image source: PicApp

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