How can you run a business while avoiding people from defrauding you?
The answer is that you will at some point have someone steal from you. It happens to all business owners. It’s probably happening right now. The issue is how much.
The most important deterrent is having good people, good, moral, ethical people. You have hire the right employees, and treat them well. You have to get them to feel that they are appreciated, that they are a part of the business, and that you trust their judgement. Where people feel taken advantage of, grossly underpaid, unappreciated, or harassed, they will find a way to strike back, either through sabotage or stealing.
You also have to lead by example, especially when it comes to ethics, and run the business strictly by the book. Many small business owners feel that they can sneak a little cash here and there, and believe me, your managers and employees will know that you are doing that, and what’s good for the gander is good enough for the goose. They will follow you into this wholeheartedly, while trying to figure how to do it even better that you. Run a tight ship. Do everything legally and in accordance with good business practice.
It is very important that you have great internal control systems. These are checks and balances which are designed to ensure that errors, irregularities, theft, loss and waste don’t occur. You should look at all business functions critically and ask yourself how things could go wrong, and how would you know it, and what would/ could you do about it. You should have an up to date reporting system, both financial and operational, and be getting good reports. You must, absolutely must review these reports. Graph the results and study them, analyze the financials and see what they are telling you. Then, don’t entirely trust them. Pick some figures every month and dive into the detail to see what they are made up of. It requires attention to details. Everything is in the details.
All this gets back to what President Reagan said: “trust but verify.” You should have spot checks and surprise audits. Keep everyone on their toes, never knowing when you will be there and testing things. Visit your businesses often, always unannounced. Get to know the employees by name, understand what they are doing, ask them for suggestions and recommendations. Some of the best recommendations I ever got came from a maintenance person who I always took the time to speak with. Remember, the front line people know a whole lot more than the management, always. Another great technique is to hire “mystery shoppers” to see just how good the customer service really is. They are inexpensive but can provide invaluable feedback.
Finally, you have to remember that businesses are composed people, product, processes and finances. You’ve got to have “control” or a handle on all. But, you’ve got to strike a balance between excessive control to the point of burdensome monitoring and not paying attention. Sure, you might catch one minor theft of a can of coffee by having a camera in the employee lunch room, but honestly, what’s the sense in alienating everyone with such micromanagement? Get a good balance.
This all sounds like a lot of hard work, and it is. The upside is that your businesses will run efficiently and effectively. You will be in touch with what’s happening and your employees and managers will appreciate the great work environment.