This is a Forbes.com article written by Matt Garrett
Entitlement is rampant, and it is ruining America.
Children today are all “special”, and they are all “winners”. They are going to “do great things” and “be somebody special.”
Most people are going to be average. That is the definition of the word, “average.”
Unfortunately, the outsized expectation of quick success versus the reality of requisite hard work and determination (in most cases just to avoid being below average), is causing depression and anxiety in today’s workforce.
The grand canyon of disparity between expectations and reality manifests itself in increased employee turnover rates, low employee morale, an ever-widening gap between the wealthy and the poor and, for you business owners, a significant increase in employee theft.
In the past three years, according to the Society for Certified Fraud Examiners, the average size of small business fraud has increased by nearly 17 percent. That should get your attention, because fraud and theft occurs in more than 35 percent of all small businesses.
To put it into sharper focus: Do you know two other business owners? If so, odds are that at least one of the three of you is being stolen from right now.
One of the most common types of fraud is accounting fraud, and one of the simplest tactics internal accountants use to steal money is called “double checks.”
Here is the way it works (this is a true story with the names changed):
Suzy is your bookkeeper of five years. You trust her. She has never missed a credit card payment. She is extremely organized and every time you ask for back-up for a charge or a bill, she has it. She is also always hounding you about your receipts, furthering her credibility. You have grown to trust her so much that today she not only pays all of the Company bills but also pays all of your bills at home. You consider her an integral part of the Company and your family. In the past few years she has been to all of your children’s graduations, your friends and family Christmas parties, etc.
Here is where it gets a bit sticky. She is the only one in the Company that knows how to use your accounting system (QuickBooks). The only other person who ever looks at your accounting system is your CPA, who only uses it once per year to prepare the tax return. She runs payroll, reconciles the bank account and does all of the invoicing. She prints financial statements for you and has rarely made any mistakes that you can see.
Meanwhile, you are busy selling new business and helping your other staff, who you feel are mostly underperforming, get their jobs done. On the other hand, Suzy is one of your star employees.
Sadly, Suzy always seems short of cash. She always complains about not having enough money and yet, just a few months ago, she leased a new Mercedes. Four years ago, she got a divorce. You tried to help her with flexible work schedules. You knew it was tough on her, and your kids even helped to babysit her kids when she was in a pinch.
What you did not know was that Suzy was in major credit card debt after the divorce, and about four years ago, she started writing herself checks. How?
Well the first check she wrote herself was the hardest, but she really needed the money, and she came and asked you for a raise, but you really couldn’t pay her more than $50,000 per year. She saw that you were making $200,000 per year and knew that if she didn’t have that money, she might not be able to pay for her kid’s daycare.
So, she wrote one check to the Electric Company for $850 and one check to herself for $85 (coded to utilities expense with the water and the security system expenses). Then she wrote one check to the Copier Company for $375 and one check to herself for $45 (coded to the Copier Expense under General Office Expense). Then she wrote one check to herself and coded it to office supplies for $129.
That first month she did this six more times in various accounts totaling $832 (tax free to her of course). Then, after she had printed the checks, she went back and changed the names on the checks in the accounting system to the old Vendors names just in case anybody (like the CPA) ever looked in the accounting file.
“That was hard,” she thinks, and she feels bad, but she really needed the money, and this way, the Company does not really have to give her a raise, that she really deserves anyway…right? After all, she is entitled to a good life and her ex-husband really screwed her over. Her kids just can’t stay by themselves. She is really just doing what she has to do to get by.
Here is the end of the story:
Four years after her initial theft, Suzy is in a pretty bad car accident and can’t come to work for nearly two weeks. The Company has their CPA provide temporary help, and the first thing she (the CPA) notices is that the bank account has not been reconciled all year. So, she starts reconciling it and sees double payments in almost every expense account. Being curious, she looks for the original bill and quickly uncovers the fraud.
Suzy epitomizes the entitlement mentality, and without the car accident, she would still be getting away with it. Perversely, you would still believe that she is a star employee.
Suzy stole $454,000 over a four year period. The only good news in this story is that the business is still in business, and Suzy was just convicted of fraud (which almost never happens) and will spend at least 3 years behind bars and have to pay back $250,000, which she does not have.
If this story sounds like you, and you have a “Suzy” in your organization, get curious. Next month, ask for back-up for all bills. Match up the checks with the bill and make sure the expense amount matches the expense on the P&L. Then make sure all of your balance sheet accounts are completely reconciled. You probably do not know how to do this, so have an outsider verify that it was done. Repeat this process randomly at least three of four times per year.
It is boring. It is tedious. It is accounting. It is not what you are best at. It does not generate any new revenue. It is also mandatory.
This business is your business and your responsibility. You are not entitled, you are not special, you are a hard working business owner and, to make sure you protect yourself, you have to be engaged in every facet of your business.
This article originally ran on Forbes.com on 10/01/13:
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