Watch your back

Dreamstime.com

Lost tools. Missing cash. Crews doing side jobs.

Theft takes many forms, and a small business offers many temptations to would-be thieves. But what if those thieves are on the payroll?

Joseph Holland, president of Majestic Lawn & Landscape Service, has experienced the worst case scenario: theft from two past employees, both resulting in the loss of thousands of dollars.

The first situation started with Majestic’s bookkeeper/office manager. Although business was building back up following the 2009 recession, and gross profit margin was high, the company still seemed unable to pay its bills, something the employee blamed on the results of the crash. She said catching up with payments was having a negative impact, something Holland says he didn’t understand.

“I was on top of analyzing job costs and profitability on every project,” Holland says. “My percentages were where they should be in order to turn a profit.”

When the bookkeeper went on vacation, Holland brought in the daughter of a close friend. She was an accountant and offered to do research on the finances in the company.

“She found a lot of theft instantly,” Holland says.

When the bookkeeper returned from vacation, Holland fired her and hired his friend’s daughter to help get them back on the right track.

A few years later, the company was still having financial problems, which the new employee blamed on the previous bookkeeper’s damage. However, when Holland asked his girlfriend, Jodi Petrilli (an accountant), to come in and help with the office, the employee got defensive.

When the bookkeeper was out of the office for an extended period of time, Holland asked Petrilli to take over the job short term. It was immediately apparent this employee had also been stealing from the company.

“I looked at her as a niece, and the whole while she was stabbing me in the back,” Holland says.

“She came in and said she was saving the day,” Petrilli says. “She gave him a false sense of security and trust.”

Long-term impact

It’s not just about the money. It also impacts your credit, which can affect future purchases. As a result of the two thefts, Holland’s credit score dropped from above 800 to 0.003. Over time, he’s been able to slowly build it back up, but still has a ways to go.

“Thankfully I have a good reputation in the community that I work at,” he says. “We’re just now starting to be able to buy new things again. It’ll be another year before I get up past 700, and banks won’t even look at you if it’s under 700.”

Holland and Petrilli have a few suggestions on how landscapers can prevent office theft.

Never allow the bookkeeper to get the mail. Another employee should get the mail and deliver it directly to you. If you’re not there, the mail shouldn’t be left on your desk for anyone to go through. It should be put in a locked drawer or safe, so you are aware of every letter.

Whether you get electronic copies or monthly paper statements, don’t leave them to your bookkeeper to review. You should examine each statement and question anything that doesn’t make sense. This also helps because it lets your bookkeeper know you’re on top of your accounts.

It’s also important to check in with the bank as often as possible, just in case anything is going on that you’re not aware of.

In Holland’s case, checks were bouncing, but because the bank knew him, no one said anything to him and kept paying the checks and charging him an overdraft fee, which he wasn’t aware of since bank statements went to the bookkeeper’s email address. Now, he makes sure to stop by on a regular basis, just to say hello to the manager and check up on any issues.

The second bookkeeper never paid the company’s taxes or workman’s compensation fees, and didn’t send any of the checks Holland wrote to pay his distributors. If any of these situations happen and they receive no response from you, they will usually send a letter via certified mail.

“We found a box of certified letters hidden because she didn’t want Joe to know she hadn’t paid them,” Petrilli says. “She also had a box of checks signed by Joe that she hadn’t sent out.”

The first bookkeeper was stealing cash from jobs and rental properties Holland runs through the business. When the cash was received, she would take it to deposit, and never go to the bank. Majestic now uses a two- to three-person deposit process. The first person logs the cash and gives it to the bookkeeper. Both then initial on the deposit slip that they agree with the amount being deposited. The bookkeeper deposits the money and then gives the slip to the first person, who verifies the amount before giving it to Holland to file.

Holland suggests making a job description for each position in your office and writing up a contract for the employee to sign, stating that no personal purchases will be made with the company card. The first employee’s name was on the card and she used it for personal purchases. You can also get employee dishonesty insurance through your insurance carrier and credit card company. If an employee is stealing from you, you can apply for a claim, provide proof of the theft, and the insurance will cover a specified amount.

When the second bookkeeper was out of the office and Petrilli had to step in, it was discovered that none of the usernames and passwords listed in the designated book were accurate. “She had control of everything,” Petrilli says. “She had all the IDs and passwords on complete lockdown.”

Holland and Petrilli suggest keeping a list of all employee login credentials for any company computer accounts. Also make sure you have administrator rights to every computer your company owns, so you can access them if need be.

Once a year, be sure to have your books examined by a licensed accountant to verify everything is above board.