employee theft (part 2 of 2)
It was a Wednesday morning, and like many mornings I was starting my day by checking emails. One from a long-time client caught my eye – the subject line was “memo regarding personal credit card charges.” As I read, I held my breath as the words spilled out on the page. It said, “Our controller made personal purchases with a company credit card.” When asked about it she told the bookkeeper that she had mistakenly used the wrong card, and already paid the charges. However, upon further research into the payments, it shows she paid these charges with a transfer directly from the business account.”
Oh no, how could this be? Maybe it’s a mistake I thought.
For the next three days, I dug into their books, hoping, and praying this would all be an innocent mistake. As the next three days passed, the little signs and weird transactions were revealed, and my optimism gave way to serious doubt.
By Friday evening I got the confirmation from the bank that I dreaded – the Controller had been issuing herself additional payroll checks that were deposited directly into her bank account. After the transfer was made, she’d void the payroll record, and then enter bogus checks into the system under other people’s names so as to not draw attention to the fact that she was embezzling.
For the next two days, I continued to dig, and the total rose to $45K, and eventually to $55K. It turns out it was not only payroll, but also vendor checks made payable in the software to someone else, and then the name changed, and cashed by her. NOTE: Wells Fargo bank lets you make a deposit on your phone – we’re guessing she just changed the payee on the physical check, deposited the funds, and no one was the wiser.
This controller, new to the job in the last six months, had shown every indication of being completely trustworthy and reliable. In fact, she had found several errors from the previous Controller and fixed them all. So, what had they missed when they hired this person in the first place?
They’d done a background check, run a credit report, verify previous employment – everything you’re supposed to do when hiring someone who is responsible for the money in your company.
Upon digger deeper, it didn’t take long to see how the systems and processes in that business contributed to this employee’s ability to embezzle.
The following Monday we confronted the employee with a full detail of what we’d found. She confessed, cried some alligator tears (literally), said there were no other amounts (which was NOT the case), gave a lame excuse of being overwhelmed and pressured, and promised to pay it back (so far, they have seen $1000).
Following that meeting, we went to the police department to file a fraud report. They provided a case number and said it may take a while for them to process the paperwork, call next week. That was two months ago.
Today after inquiring for the 3rd time about the report, they told the owner that this case was #133 and that there were 132 cases in front of theirs!!! My heart sank. Are there really that many people out there stealing from their employers? Unfortunately, the answer is YES – there are.
We want to see the best in people, and not believe that they would do something like this, but they do. As business owners, we have a fiduciary responsibility to all our stakeholders (partners, employees, customers), and thus need to be diligent in managing the finances of our companies.
Below are some tips that can help you avoid this happening to you. I also encourage you to read “How to Spot Accounting Fraud.” EVERY time I’ve seen someone embezzle from a company there were signs. This is your DO NOT list…
- Do not let employees be signers on the bank account – especially if they are the ones cutting checks and reconciling the bank account.
- Have someone other than the person approving/cutting checks reconcile the bank accounts. Make sure to get copies of the front and backs of the check, and review the payee against what shows in your accounting software.
- Do not let employees make transfers between bank accounts. This should be done by the owner.
- Do not pay with credit cards online with a transfer, rather cut a check. This is the number one place where people embezzle money in small companies. There should be a backup for all credit card charges attached to the statement.
- Don’t sign checks without backup. Make sure to review the backup and that the appropriate person has approved the expense.
When you don’t pay attention to the ways employees are spending your money, they will assume that it is okay with you. That includes your office and field employees. Really, it’s weird, but they will think over time that it must be a perk of the job if you let them purchase tools for themselves, or gas for their personal use, or pay their phone bills, or car payments. I’ve seen it – no joke.
I implore you – don’t abdicate your financial well-being to the really competent and talented accounting person who wants to “unburden you” with the hassle of accounting. That is a warning sign.
If you missed last week’s blog, check it out “Are your employees stealing from you? How to spot accounting fraud.” And here’s a resource that will help “How to Spot Accounting Fraud.”
are your employees stealing from you? (part 1 of 2)
Lately, I’m hearing a lot about accounting fraud being on the rise, and I was compelled to re-share this and my next post, as it is CRITICAL that you know how to have controls in place in your business to avoid employees from stealing.
Your first thought might be, “Oh that would never happen – but trust me, it does! Even with the most trusted of employees!”
The latest statistics on fraud should send a big jolt of fear into small business owners. According to an embezzlement survey by HISCOX, a specialty insurance company, 80 percent of embezzlements occurred at small businesses — defined as those with less than 150 employees — and 30 percent of embezzlements involved a loss of more than $500,000.
The first time I witnessed someone stealing money from a company I was shocked and dismayed. I couldn’t believe that someone in the financial management field could be so unscrupulous – after all, by nature of their job in accounting, they are the gatekeeper of a company’s money.
At the time I was 29, and that experience opened my eyes to understanding that having financial controls in place is critically important. In the years since, I’ve seen many instances where a company’s lack of control has resulted in people stealing from them.
In this time when more and more work is being done remotely, including paying vendors and processing payroll, it’s critical that you have controls and processes in place to avoid this happening to you.
In today’s video, I share simple practices and processes to help you avoid accounting fraud and stealing in your business.
A resource you may find helpful is “10 Ways to Spot Accounting Fraud.”
improve cash flow by knowing your average AR collection days
Cash flow is the lifeblood of any contracting business, and it’s especially important during times when work is slowing, or job starts are delayed.
Knowing your average Accounts Receivable (AR) collection days can help you manage your cash flow better so that you don’t end up in a situation where you don’t have enough money to pay bills when they come due.
What are “Average AR Collection Days?”
Accounts receivable (AR) collection days measure the average number of days it takes for customers to pay their invoices after they are sent out. It’s an important statistic for contractors because it helps you understand how quickly their customers are paying their bills and how much time you need to allocate for collecting payments from clients. Knowing this information will also help you evaluate their payment processes and can make forecasting future cash flows easier.
Why You Should Track Your AR Collection Days
Tracking your AR collection days allows you to be proactive about managing your cash flow. If you know that it typically takes 30-45 days on average for customers to pay their invoices, then you can plan ahead and make sure that there is always enough money on hand to cover expenses until those payments come in.
This will help you avoid having to borrow money at high-interest rates, which could put a serious dent in your profits. Additionally, tracking your AR collection days will help you identify any problems with billing processes or customer service issues that could lead to delays in payment since those may be causing customers not to pay as quickly as expected. This way, you can address any issues promptly and ensure that payments are coming in on time.
Having control over your cash flow is essential for the success of your contracting business, especially during times when work is slowing, or job starts are delayed.
Grab this easy-to-follow formula, “Calculating Avg AR Collection Days” and calculate your average AR collection days today!
contractors – don’t make this costly mistake
We’ve all been there, underestimating the hours a job will take and leaving ourselves short on profit.
But the real danger comes when you don’t even know how much your employees are really costing you.
Without knowing the true cost, you’ll never be able to accurately set your markups, and that’s a quick way to blaze your way toward financial chaos.
But fear not – gaining clarity on your true costs is the key to unlocking sustainable growth for your contracting business, and that’s what today’s blog is all about!
Taking the right steps now can help you ensure those unexpected costs don’t come back and truly bite you in the future.
Put trust in the data that’s available to you by calculating your real labor costs, to have the right cost basis when bidding. Don’t let profitability slip through your fingers!
Watch this video and then go download your FREE labor cost calculator. Watch to the end where you can get another amazing FREE offer that will provide you with a ton of great tools and resources to help you grow and thrive as a contractor!
understanding markup vs. margins for maximum profitability
As a contractor, understanding markup vs. margin is essential for your success.
Bidding on projects without properly calculating your markup can be a recipe for disaster. Knowing how to calculate markup and margins gives you more confidence when selling projects, and is the first step to making a consistent profit.
In this blog post, I show you an easy approach to understanding markup and margin, as well as provide some free resources that will help you bid confidently knowing that your project will be profitable from day one!
Why Does Understanding Markup Matter?
You want projects to be profitable – that’s a given. To achieve this, it’s important to understand how markup works. If you don’t know how much you need to mark up on bids in order to reach the desired gross profit margin, you will likely bid too low and lose money before the project event starts!
How Can I Learn More About Markup vs. Margin?
Understanding markup and margins can be intimidating but once you understand the basics it becomes much easier! With the help of my video plus the FREE table I provide, you’ll have the knowledge needed for calculating accurate bids with confidence. Also, feel free to grab my article “Markup vs. Margin Explained.”
Having a good grasp of these finance fundamentals means less stress in wondering whether or not your projects will be profitable.
manage projects when you don’t have all the details
Navigating the tricky balance between clients expecting you to bid and deliver projects on time, but your design teams not providing sufficient detail can be one of the toughest challenges for contractors.
Fortunately, my guest today has been finding ways around this issue for over two decades — from architects’ perspectives, the contractors’ perspectives, as well as those of homeowners!
Join me in this 15-minute chat with Jenny Rios to discover how she helps project teams gain trust and collaboration; plus get a free resource so that you too can make sure everyone takes ownership – even when faced with a lack of details.
And feel free to grab Jenny’s “Signal Pricing Tool” template and start getting the entire project team to own the results of your projects with amazing collaboration!
generous GC shares his hard-won secrets to success
Becoming successful in the construction industry isn’t something that just happens – you have to work SMART at it.
The trick is knowing the right things to focus on…
Because once you know the key drivers that consistently move the needle, your life as a contractor gets easier and much more enjoyable!
I’m confident this will be one of the most eye-opening interviews you’ll ever hear.
Aaron is a very successful and well-respected GC and, in this interview, he generously shares the primary things he focused on, that play the most significant role in the success of his business.
Aaron reveals:
- The little-known secret to being a successful contractor who makes a solid profit and is well respected (this will surprise you because it’s probably not what you’re thinking)
- The worst obstacles he had to overcome along the way (This will help you avoid being blindsided by these same landmines and pitfalls)
- The top 3 most important things he pays attention to on projects that have made a huge difference in project profitability (#2 is priceless)
- Insights into building a great team (and how to avoid hiring the wrong person)
- And so much more!
If you want more control over your contracting business’s success, you need to keep your finger on the pulse by leveraging the most critical drivers contributing to its success.
Watch the video and learn what they are!
And be sure to keep an eye out for the follow-up interview I did with Aaron… I’ll share it with you next week, it’s a MUST-SEE!
In it, he reveals how doing “cost-to-complete-projections” monthly has been instrumental in his ability to control project profitability.
You’ll see us walk through a real project example, so you can see exactly how Aaron does this, and model his process.
This ONE THING is critically important for GCs in 2023
Have you ever had unforeseen costs to pay on a project AFTER all the contract billings had been done?
If so, you are not alone… and if you don’t tighten this up, in 2023, the sting may be a lot more severe.
Why?
Because as much uncertainty as we saw in the last couple of years, we’re not through the woods yet.
In fact, this coming year may be even more turbulent.
So, if you have ever had the experience of looking at your profit & loss statement one month and it showed an amazing profit, only to review it again the next month and have it show a huge loss, you will find today’s video VERY insightful and helpful!
Watch it right now and discover (with pin-point certainty) how much profit you will actually make on each project, in 2023.
I interviewed Aaron Gordon, a successful and well-respected GC, and he revealed how doing this ONE SIMPLE THING can give you…
- Greater clarity and control over the actual profits of your business…
- More certainty and peace of mind about the financial health of each project (and your entire business as a whole)
- How to organize and approach doing “cost to complete” projections, monthly… and how to quickly bring your team up to speed, so they do them consistently…
- And so MUCH MORE!
This is a GREAT topic to start the year with because the rewards that come from the secrets Aaron shares will directly benefit your BOTTOM LINE!
Watch the Video now!
If you want to find more ways to make a consistent profit on projects, make sure to check out my book, “The Profit Bleed – how managing margin can save your contracting business!” In it, you’ll find lots of great FREE tools and resources too.
What will make 2023 a great year for you?
- This exercise is NOT about making resolutions or creating a long to-do list of tasks to get done.
- It IS about answering a few simple questions that will help you envision the year you’d like to create.
In the process, you’ll have formulated what a great year will look and feel like for you.
Before you can identify the “how” you must identify the goal. Kind of like before you can build an estimate you have to have a blueprint for what the outcome will look like. That’s what I’ll walk you through in this video.
Have fun!