Follow the Money: Preventing Embezzlement at Your Self-Storage Business
|Copyright 2014 by Virgo Publishing.|
|Posted on: 05/04/2011|
By Rhonda Savage
With the economy improving, John was thrilled to see his small company starting to boom. With all the new business, he was busy signing new accounts and training his new staff, so he delegated the bookkeeping responsibilities to a long-time employee he trusted. As time passed, John started noticing discrepancies in the business account and discovered the employee had been embezzling money from the company.
Unfortunately, embezzlement is not uncommon and is often difficult to detect. What could John have done differently to prevent this?
Embezzlement is a crime of opportunity and trust. A trusted person is placed in a position that allows him complete access to the financial data of the business, typically with minimal or no oversight by the supervisor or owner. The best way to prevent embezzlement is to be honest yourself in your activities. Leaders must lead by example. Second, pay and treat employees well. Finally, hire the right employees. Start by checking all references.
Consider obtaining fidelity bond-insurance coverage on the employee in charge of your books. If the employee is not bondable, do not place him in the position of handling your financial matters. Run a criminal background check.
Here are more techniques you can take to decrease the opportunity and temptation for embezzlement.
Assign designated duties. Don’t have just one person handle your incoming mail and deposits, balance the checkbook, or send statements. Instead, parcel out these duties. This is difficult in smaller businesses with only a few staff members. In this case, the owner needs to handle or outsource payroll, tax preparation, and account balancing and management. If he chooses to outsource this work, the same due diligence of inspecting the bookkeeper's work is very important.
Review reports. Every day, generate an end-of-day report, an adjustment report, and a history of payment that breaks down cash receipts, credit card payments, checks and outside financing for services on your desk. The owner should compare the deposit-slip receipt to the deposit. Do an occasional mini-audit of the books. Let your staff know you're looking every day by questioning them. For example, say, "I see Mrs. Smith didn't pay this month’s rental fee. Is there a reason why?" This shows your employees you’re keeping an eye on the day's activity. These checks take five to 10 minutes of your day.
Review your bank statement. Inform your staff that they are not to open any mail from a banking institution. Even better, have your bank statements sent to your home address if your mailbox is secure. Scan the checks that were written―your signature should be on each.
Know where your money is going. If you do hire an employee to process your accounts payable, develop a system for your mail. Staff should put the incoming mail in one location on your desk. Review the bills and put them in an in-basket for the employee to process. Have the employee print the checks and attach them to the invoice, then sign them. If you don't recognize a check, question it. A different staff person should stuff the envelopes and mail the payments. If the same person pays and stuffs the envelope, the checks can be changed.
Establish office policies. Make deposits daily, close and balance each day, bill services as rendered, and send periodic statements if purchasing extends over time.
Review your monthly reports. Each month should be closed out prior to running the reports to prevent changes. Write pre-numbered receipts for all cash payments and monitor petty cash. All records should be kept at the office. Do not allow employees to work extended hours and establish password control for sensitive areas, such as payroll.
Watch your overhead. Learn to read your financial statements. You should know the basic overhead numbers for the business. One example of a common fraud/embezzlement system involves double payments for supplies, or the creation of dummy vendors. Another example is the ease of obtaining preauthorized credit cards in your name, using the credit card to pay personal bills, and developing schemes to pay the credit card. Run periodic credit checks on your own credit line and watch open lines of credit.
Be a fair, consistent, honest leader. Leaders live in glass houses. We cannot expect our staff to model differently than we ourselves model. Don't take supplies from the office home. This teaches your team that stamps, pens and office supplies are OK to take. Watch your use of time in the office. If your time involves taking personal calls, surfing the Internet or running a side business and you’re not focused on your primary venture, your team will do the same.
Time embezzlement is the greatest loss to the majority of businesses. Set your office policy regarding cell phone and Internet use during office hours, and then abide by it yourself. An employee who embezzles time by spending it on the phone or Internet not only hurts your bottom line, he impacts the entire business. Because of the increased burden on the team that’s working, resentment builds. And with the resentment, you'll experience decreased morale, which leads to loss of production.
Know that you shouldn't become immediately suspicious of your team, but there are steps you can take to reduce your risk. Consider these steps to be a positive focus for your business. You will become a better manager of your business when implementing these steps, and protect your assets and enjoy more profitability, which you can then share with your team in the way of rewards, bonuses and increased pay.
Dr. Rhonda Savage is an internationally acclaimed speaker and CEO for a Mile Global, a management and consulting business. For more information, e-mail email@example.com ; visit www.milesglobal.net .