Have you ever had the day from hell?
One of my construction company coaching clients recently told me a long and winding tale of employee theft and deception too horrible to believe. He had recently hired a new controller. And as he began to take over the accounting department, he discovered some unusual situations. For starters, the company cell phone bill included four phones he couldn’t identify. He soon found out that three office administrators and the office manager’s 10-year-old daughter had been issued company cell phones without authorization. This was just the beginning!
Some people are sneaky!
It’s amazing how sneaky, creative and unethical people can be. The new controller continued to discover many more illegal, immoral and improper practices had occurred on an ongoing basis. One of the key project managers, who had been there for 20 years, was having the company pay for personal items by job charging his credit card expenses to project cost codes. When he approved personal charges as project costs, he paid for his lifestyle at the company’s expense without detection. The controller also discovered unusual payments occurred during the remodel of the project manager’s home. He was approving invoices and job charging labor, materials and subcontractors who worked on his home to company construction projects he was responsible for.
The controller also found out that the payroll manager had used the automatic payroll deposit feature in the accounting software to advance extra money on her paycheck. The human resource records were lacking proper documentation for vacation time taken too. When certain people were on vacation, no vacation time was being noted in their records. Some office staff was being paid 40 hours when they regularly left early or took personal time off. One bookkeeper was even found using the company postage meter to run her mail order business. The field foremen were using the company gas cards to fill up their personal vehicles on a regular basis.
How much should you trust?
The owner had prided himself in building a company where people were the number one asset. His motto was to build a great place to work and tried to delegate and trust key employees 100 percent. This was obviously a mistake without proper controls in place. Numerous employees were aware of inappropriate actions and condoning the entitled behaviors, but didn’t act or report it. Discovering this long-term problem was a shock to his company, his trust in people was shattered, and many people were terminated as a result.
Do you have a clue?
As the owner and leader of your company, you set the vision, values and goals, and then trust managers and employees to implement and make it happen. Too often, busy business owners and managers don’t want to deal with little details required to run and manage their company. They therefore delegate small day-to-day business operations including signing checks, approving contracts, insurance terms, employee benefits, and compensation packages without proper procedures or checks and balances in place. When you trust too much, greed and entitlement can creep into the culture of companies and start to become the norm. Some clues to watch out for can include:
• People remodeling homes and building pools
• New expensive cars, trucks, boats or R.V.’s
• Marriage difficulties and separations • New marriages with big weddings
• New family pressures or children starting college
• Staff buying new or bigger homes
• Plastic surgery or makeovers • People leaving work early or working less hours
• Personal stress not related to work
• Managers not leading by example
To avoid this from happening to your company, consider implementing the following procedures:
• Never issue company credit cards or cell phones-Try to have employees use their own cards if possible and reimburse them within 24 hours for approved charges.
• Send all bank statements to the owner’s home-Review all cancelled checks, automatic payments, transfers and deposits.
• Owner sign all prime contracts, subcontracts and change orders.
• Two signatures or approvals required on all checks, subcontracts, purchase orders, change orders, reimbursable expense accounts, overtime, vacation requests, payroll preparation, approvals, deposits, project payables and job costs.
• Personnel records must be perfect-Daily timecards must include time started and time finished every day. Leaving early and arriving late must be deducted from pay.
• Follow your employee manual to the letter.
• No exceptions to the labor code or laws. •
No special exceptions for long-time employees, relatives, special circumstances, etc.
• Review all job cost payables, credit card invoices and company accounts every month.
• Trust your people, but follow your rules!
Everyone wants to trust their employees, but you must have controls to keep honest people honest. A few simple checks and balances will avoid lots of problems, disappointment, stress and financial loss. Don’t wait until it’s too late to implement some of these safeguards.
George Hedley works with contractors to build profitable growing companies. He is a professional business coach, popular speaker and best-selling author of “Get Your Business To Work!” available online at www.hardhatpresentations.com. To sign-up for his free e-newsletter, join his next webinar, be part of a BIZCOACH program, or get a discount coupon for online classes at www.hardhatbizschool.com, e-mail GH@hardhatpresentations.com.