For those of you who read my book First Aid for a Wounded Business, the inspiration for the book was based on a real-life story. Martin Demarest (who has since passed away) was the owner of M&M Truck Maintenance in Lakewood, WA. I was referred to him by one of my long-term clients. When I start working with Martin, he let me know that he recently discovered that his bookkeeper had embezzled over $400,000 from his business in a 5-year period. I immediately went into business first-aid mode to help him overcome the horrible damage that was done by the theft. Sadly, the business was to far underwater, and within a few months he had to declare bankruptcy and close shop. I wrote the book in his memory as if I had been able to save his business. To this day, I tend to be a “Numbers Nazi” with my clients because I NEVER what to have them go through what Martin had to go through.
If you are telling yourself right now “This can never happen to me” you are setting yourself up for a fall. According to the Insurance industry newsletter Embroker, annual employee theft is as high as $50 billion per year. Don’t let yourself become part of that statistics. Here’s how you can stop embezzlement in your business before it starts:
One of the best ways to prevent employee embezzlement is to conduct thorough background checks on all potential hires. This can include criminal record checks, credit checks, and reference checks. While a background check won’t guarantee that an employee won’t steal, it can help to identify any red flags that could indicate a potential problem.
Another important step in preventing embezzlement is to limit employee access to financial information and assets. For example, only a few trusted employees should have access to the company’s bank accounts, and they should be required to obtain approval from the you, the owner, before making any withdrawals. Similarly, only authorized employees should have access to accounting records or payroll information.
You should also separate duties among employees to ensure that no one person has too much control over financial matters. For example, the person responsible for writing checks should not also be responsible for reconciling bank statements. By separating duties, it becomes more difficult for an employee to carry out an embezzlement scheme without being detected.
Internal controls are policies and procedures that help to prevent and detect fraud. For example, you can implement a policy requiring two signatures on all checks over a certain amount. Another common control is to require employees to take vacation time so that someone else must perform their duties in their absence, reducing the risk of ongoing fraud. This will require clear system instructions for the alternate employee to use while the main employee is on vacation.
I know this is not a lot of fun, but you should also monitor financial activity regularly to identify any suspicious transactions. This can include reviewing bank statements, monitoring employee expenses, and conducting regular audits. By keeping a close eye on financial activity, you can quickly identify and address any issues before they become major problems.
Finally, it’s important for you to create a culture of honesty and integrity. This can include implementing an anonymous reporting system for employees to report any suspicious activity, as well as providing training on ethical behavior and the importance of reporting fraud. By fostering a culture of honesty and integrity, you can create a team of employees who are invested in the success of the company and committed to upholding its values.
By implementing these tips, you can help to prevent and detect fraud, protect your assets, and create a culture of honesty and integrity. While there is no foolproof way to prevent embezzlement, by taking these steps, you can significantly reduce their risk and protect their hard-earned success.
Why Business Coaching is Important
We know that the greatest athletes in the world rely on expert coaching to help them become world class at whatever they do. Likewise, business coaching is a rapidly growing industry and for good reason. It is becoming increasingly evident that businesses of all sizes, in all industries, can benefit greatly from working with a business coach. Whether you are the owner of a small startup or the CEO of a large corporation, business coaching can help you achieve greater success, reach your goals faster and operate your business with more ease and efficiency.
7 Steps to Systemize Your Business
Small business owners often struggle with finding the right balance between serving their customers and managing their operations effectively. Systemizing your business can help you streamline your processes and make your work more efficient, freeing up more time to focus on growth and customer satisfaction. Here are 7 steps you can take to systemize your small business:
The 7 Keys of Small Business Leadership
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