Bare Bones Business: Embezzler exposés provide protective tips

These are sad, sorry tales involving lies, misplaced trust and broken hearts. How does it happen? And how can you keep it from happening at your small shop?

Here are a few common ways to rip off the boss: moonlighting; pocketing cash tickets; fudging on time cards; charging personal items to your company credit card; processing phony payables; taking office supplies or inventory for personal uses; depositing sales revenues into personal accounts; and fudging on payroll.

The worst rip off method I’ve heard of? A friend of mine discovered that his bookkeeper was plunking the payroll tax deposit into her personal account. She stole more than $25,000. But even worse, my friend was liable for the missed payroll taxes and late penalties.

Embezzlement is a nasty subject. It makes you feel dirty even talking about it. But sooner or later, every embezzler is exposed. Usually, through some out-of-the-ordinary activity, you discover something suspicious.

One fellow told me he noticed a “service call only” invoice for a good, regular customer. He called the customer to make sure that there wasn’t a problem. The customer assured him that the service tech had done a terrific job replacing his faucet. However, the customer did find it odd that the technician offered 10 percent off if he paid in cash.

Another contractor uncovered an embezzling problem when his credit card was declined for being overdrawn. Embarrassed, and confused, the contractor raced back to the office to check the statements. He discovered that he was over his limit with charges that he didn’t make.

Another contractor caught his customer service rep selling service calls to another plumbing company.

Why does an employee steal?

• He feels you owe it to him or is justifying his bad behavior.

• He means to pay it back. Good people get into bad situations.

• You aren’t paying attention. An employee who might not rip you off under your scrutiny may take advantage of your inattention.

• Your employee has a substance abuse problem. Drugs and drinking can turn a good person into a liar and a cheat.

Now, I am not suggesting that you never delegate responsibility, nor would I want you to become paranoid about everyone in your company. Most folks are hardworking and decent. They show up for work every day, ready and willing to do a great job.

But every now and then you’ll hire a bad apple, or you’ll employ a fairly reliable person faced with difficult circumstances, who will cross the line and rip you off.

How can you keep it from happening? These guidelines will help.

• Maintain the highest personal integrity. Your personal integrity, as demonstrated by your actions, establishes your company’s culture.

• Be fair. Establish a clear and equitable compensation plan that rewards productivity and adherence to behavioral standards.

• Make sure everyone takes a vacation. An embezzler is most effective if no one else ever sits in his seat and does his job. Share his chair once in a while.

• Open the mail. Many forms of embezzling will show up in the mail – on bank or credit card statements or a letter from a vendor alerting you to a problem.

• Reconcile the bank statements yourself. The bank statement reports all the cash that went in and out of your bank account. If you can’t bear the thought of doing the bank account reconciliation, at least thumb through the checks, in full view of the person who will reconcile the account.

• Read your financials. It is your money. It is your job as the owner to keep track of the business. And your employees will know that you are paying attention.

• Open the books. What if everyone at your company knows where the money is? Do you think one dishonest person would risk trying to pull the wool over everyone else’s eyes?

• Maintain a drug-free company. Solicit help from a professional drug-testing company and your insurance provider. Establish a drug-free environment at your company, not just a paper policy.

These guidelines will help you discover an embezzling problem. Even better, they will prevent embezzling. You will feel more comfortable and less vulnerable.

It’s a terrible feeling to be ripped off. These tips may keep it from happening to you.

Ellen Rohr is an author and business consultant who offers systems for getting focused and organized, making money and having fun in business. Her latest book is “The Bare Bones Biz Plan.” She can be reached at ellen@barebonesbiz.com.