Ask Dawn: I think someone is embezzling from our company

Tue, 10 Oct 2023 09:20:11 +0000

Dear Dawn, I run a dental practice and I’m worried that one of my trusted employees might be embezzling from our company. I noticed our profits seemed to be slipping over the past few years even though we seemed to be producing a lot of revenue. I started looking harder at our financial statements and noticed several irregularities, such as missing funds, unexplained expenses, and altered financial records. I tried to bring up my concerns with my partners, but they have have been dismissive. All of our employees have been with us for a long time, and they're like family to us. My partners can't believe any of them would steal from us so they think there must be another explanation and I'm overreacting. I am not sure what to do next or how to protect our business from further harm. I feel stuck. What should I do? Sincerely, Suspicious Dental Practice Owner Dear Suspicious, I can understand how challenging and stressful it can be to suspect that someone may be embezzling from your company. This situation is far more common than you think. I've had friends who experienced it. It happened in my own practice. I’m currently supporting a client in a similar situation. It's the dirty little secret that no-one wants to talk about. We don't talk about it because it brings up feelings of embarrassment or shame. We feel like we should have known.

Embezzlement is a violation of trust.

More than anything, this loss of trust is what hurts the most. Because of this loss, you're probably experiencing one or more of the phases of grief:

Denial. There's no way they could do that! They're like family!
Fear. What else could they have been doing? What do I NOT know about?
Bargaining. Maybe they had a good reason...
Anger. How could they? We were so good to them!

It sucks. Take a deep breath and remember that you are not alone in this situation. Many business owners have faced similar challenges and have lived to tell about it. As a business consultant (and human), I can offer you some advice. Start with clarity. Before making any further decisions, it's important to gather as much evidence as possible to support your suspicions. Review your financial records and bank statements to identify any discrepancies or suspicious activity. If you are not familiar with financial analysis or forensic accounting, consider hiring an experienced financial professional to assist you. Once you have gathered enough evidence to support your suspicions, you need to decide what to do next.

Should you take legal action?

Many people immediately think they need to take legal action. Here are some points to consider about that:

Evidence: How much evidence do you have to support your suspicions? How concrete is it?
Severity: How much money is involved?
Relationship: Do you have a good working relationship and a history of open communication? Or has the relationship already broken down and you suspect they may be acting in bad faith?
Legal implications: What are the potential legal implications of taking action? Consult with a lawyer who specializes in business law to discuss your options and the potential consequences.
Emotional impact: Legal action can be stressful and time-consuming. What would the emotional impact be on yourself, your partner, and your business?

While legal action is sometimes both called for and realistic, often, it's not a great option. Embezzlement can be hard prove. In a lot of cases, people don't have enough evidence or the expense of bringing the action doesn't make sense financially (legal fees would make it cost more than it's worth.) Often, however, in the course of uncovering what happened, you realize that you're partially responsible. Perhaps your business lacked security, had poor systems and controls, or fostered an environment that created employee resentment. That can be a tough pill to swallow. It's also the most empowering.

Use this opportunity to make your business stronger.

Here are some things you can do to strengthen your business and prevent this from happening in the future. 💪 Protect your business from further harm. Change your passwords and limit access to financial records to reduce the risk of unauthorized activity. 💪 Institute checks and balances. Put stricter financial controls in place, such as separating financial duties and conducting regular audits. 💪 Develop processes for receiving payments and managing inventory or equipment. 💪 Conduct external & internal reviews of bookkeeping. 💪 Keep channels of communication open. Understand what is going on with your employees and partners both professionally and personally. Personal challenges can lead people to make bad decisions out of desperation. 💪 Set your people up for success. When it's clear that bad behavior will be noticed, it makes it easier for people to not engage in it. Support people to do the right thing by taking the option of doing the wrong thing off the table. Finally, while it's crucial that you protect your business and make it stronger so this doesn't happen again, it's also important to look after your own personal well-being. Seek support from trusted friends, family members, or a therapist who can help you process your emotions and develop coping strategies.

The Fall Down Factor: what it is and how to prepare for it

Wed, 15 Mar 2023 16:19:32 +0000

In business, it’s a good idea to hope for the best but expect the worst. Part of preparing for the worst is identifying and planning around Fall Down Factors.

What is a Fall Down Factor?

An unplanned event or circumstance that could cause you and your business to Fall Down. In other words, become unable to meet your obligations or carry on your business as usual. One of the most common Fall Down Factors is an over-reliance on key team members. Consider your business for a moment. Is there someone on your team who:

Is the only person who knows how to perform certain tasks?
Is the “go to person” who holds a lot of your business knowledge and practices in their head?
Is the person that your clients/customers ask for or prefer to deal with?

Is that person YOU? Eventually, this person will stop working in your business. This might be a long-term temporary absence for health or personal reasons. Or they may quit or retire. In the worst case, they will leave without any notice. Without appropriate measures in place, their absence will cause a negative – even devastating – impact on your business. You can avoid that fate by taking these measures:

1. Develop Standard Operating Procedures

Get the organizational knowledge out of their heads and into written or digital form. Make notes and checklists about how to do things. Keep these up-to-date and easily accessible. Not only will these be gold in the event of a Fall Down event – they’ll help you train new people faster and deliver more consistently.

2. Cross Train Your Staff

Cross training is essentially teaching your employees the skills they need to perform other roles within the company. Beyond preparing for a crisis, cross training improves your business efficiency, increases productivity, and leads to more collaboration and synergy. Cross training also delivers benefits to your employees. It prevents boredom, makes them more “promotable” and provides the development opportunity that most quality employees look for from their employer.

3. Develop Next Generation Leaders

What would happen to your business if you took 2 months off to go on an extended vacation? In addition to cross training staff for operational skills, implement a program to identify and groom people who could run the place without you. Building redundancies in your leadership ranks becomes more and more important as your business grows.

Bonus: Consider Getting Key Person Insurance

Key Person Insurance is life or disability insurance that you carry on yourself as owner or on your hard-to-replace employee. While insurance provides a financial buffer in the worst-case scenario, it doesn’t solve the dependency problem. The better long-term option is to develop a business without this level of dependence on a single person. When you have standard operating procedures, cross-trained staff, and a bench of backup leaders - someone else can step into any role on short notice and at least keep things going until you can find a permanent solution. As with most preventative measures, you may be tempted to add this to your long list of things you “should do” where it will quickly be forgotten about. The reality is that you will never magically have time to undertake projects like this in your business unless you make a commitment to dedicate time and energy to working “on” your business instead of in it.

The Freedom Flywheel - Blog , Risk Management