Home Articles How to make sure your employees aren’t ripping you off

How to make sure your employees aren’t ripping you off

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A common theme among failed businesses is inadequately managed finances and accounting irregularities. As a business owner it is important to have adequate measures in place to protect your finances and assets.

An example highlighting this necessity is the recent case with electrical goods retailer Clive Peeters, where an employee allegedly siphoned $20 million of company funds.

This shocking example demonstrates the need to review figures regularly, implement practices to strategically manage the businesses’ finances and understand how your business is financially positioned.

If such an event can happen to a large brand like Clive Peeters, it’s not hard to argue that all businesses are vulnerable.

Understand your financial positioning

If you do not understand your debts, assets, liabilities and other financial indicators, it is almost impossible to run a business not just successfully but at all.

Knowing how a business is financially positioned can:

  • Assist you make important business decisions
  • Ensure the business is remaining profitable
  • Ensure that assets are protected and are not being misappropriated
  • Reduce the risk of you being taken advantage of

Implement tight controls

It can be tough for business owners as they have to place a great deal of trust in their team to do the right thing. This isn’t to say that you can’t trust employees but you need to have the right controls in place to lessen the risk of dishonesty. These controls include:

  • Segregation of duties: For example, in a small business you should have one person who prepares the invoices and another who pays them, which in most cases is the business owner
  • Regular stocktakes: this is important to manage and control your inventory and pinpoint any leakages
  • External audits: Have your external accountant review your books on a regular basis
  • The ‘Smell test’: For example, if you have an instinctive feeling that something doesn’t add up, for instance the business has been going well but there is low or no cash, look into it straight away.

In most instances business owners ignore the warning signs and, if left for 12 or 18 months, the problem can get out of hand.

Get back on track

The reality is that most businesses will be exposed to some act of dishonesty at some time and in most cases a business can recover. The most important thing is for the business to continue moving forward. Some tactics to get a business back on track include:

  • Address the issue and stop the leakage
  • Get the balance sheet back in order
  • If necessary bring in outsourced people to help untangle the problem
  • Be honest and transparent
  • Take measures to instill confidence in your team, clients and suppliers
  • Put in place controls to help ensure the problem doesn’t arise again.

Does anyone else have any other suggestions about how to spot, manage and counter dishonesty in business? Perhaps you too have encountered similar problems and have managed to overcome them?

Michael Derin is founder and MD of accountancy firm Azure Group. Derin is passionate about helping small and medium-sized businesses reach their financial and business objectives and achieve success.

Image by I Don’t Know, Maybe.

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