I’ve heard some horror stories from business owners. No, nothing like Freddy Krueger, but something just as terrifying: embezzlement. I want you to go to Google News right now and just search for the word embezzlement. Then look at the dates on all those stories. It happens every day, and those are just the cases where someone is caught!
We all know the name Bernie Madoff. Madoff (and this pun has been done before but I’m going to do it anyway) made off with $65 billion. Right now he’s hanging out in prison, serving 150 years. While Madoff became a household name, embezzlement remains a quietly talked about subject, a white-collar crime that never hits the mainstream media unless the money hits into six figures. The reality is that there’s a 50 percent chance that embezzlement has occurred or is occurring in your business. I think that’s mainstream enough to get your attention.
Like a lot of risks in life, embezzlement is not something you can ever fully protect yourself from. Instead, you just have to be proactive in checking for opportunities that embezzlers can take advantage of. Things like improving your hiring protocols, learning the warning signs, and establishing and maintaining controls and checks, are the difference-makers in helping keep your business out of the hands of financial Freddy Kruegers.
The following excerpt is from my new book, “Uncomplicate Business: All It Takes Is People, Time, and Money.”
Excerpt: I have been consulting for twenty-five years in dentistry, and I have many close friends in the consulting business. We all universally agree on one thing: Walk into any dental office in America and check for embezzlement and you will find it 50 percent of the time. My friends who consult in other small businesses in America report the same percentage.
So what does this mean? If you own a small business, there’s a 50/50 chance you’re being embezzled from today. There is no foolproof system for protecting against embezzlement, but removing the opportunities will dramatically reduce your chances of it happening to you. Unfortunately, and all too commonly, small businesses fail to take the steps to protect themselves from embezzlement until after the crime has been committed.
One day a colleague approached me with a story about how his front-office employee had embezzled money from him and his partner before she was caught. This front-office employee deposited insurance checks into her own accounts located at several different banks. She had a stamp made with her name on it to enable her to add her name to the check. The banks where the deposits were made took the checks without question; since they saw her so often, they assumed there was no problem. She posted the insurance checks to the patients’ accounts in the practice management software. Patients never received statements and the outstanding insurance report did not reflect a problem. Since she only went to the bank once or twice each week, there was no daily deposit slip to match up to a day sheet. The dentists failed to request any paperwork from her on a daily basis, eliminating any checks and balances for collections.
This woman was caught only after the second dentist started questioning the low deposits. During the investigation, the deposits from the first dentist showed up and the dentist was notified. Up to that point, the dentist was unaware that any money had been stolen from her. By then, this front office employee had left the dentists’ office for reasons other than embezzlement. She currently faces felony charges and the total amount stolen from both doctors is still under investigation. …
I want to help keep you from becoming a victim.
The key to preventing embezzlement in your business lies in improving hiring protocols, watching for the warning signs, and insisting on high ethical standards among your staff. In addition, you must establish internal controls, implement strong internal systems and do regular safeguard checks. …
- Be transparent about embezzlement with your entire staff.
- Do background checks on all potential new hires.
- Establish internal controls, systems, and checks for you and your staff. Make sure that more than one person is handling the bookkeeping to ensure double-checks.
- Watch for the warning signs. Monitor the performance of your employees and consider performing random drug tests if you notice any unusual behavior.
- Conduct regular audit reports.
- Partner with a CPA.
