Archive of Tips

RI SCORE's Monthly Tip for Small Business Success

Don't Abuse Trust in Your Employees

No business owner hires someone that he knows to be dishonest, it's foolish and dangerous. So, you start out having a belief that you can trust each employee. Over time that trust increases, particularly if the employee is a good worker and successfully discharges added responsibilities that they may be given. Eventually the owner may trust the employee implicitly. This is normally followed by providing greater access to company assets such as bank accounts, purchasing accounts and customer collections. For many of us in small businesses you do those things without thinking things through. You may very well wind up abusing the trust that you started out with.

How does that happen? Everyone in life has times where things are difficult from a monetary point of view. In other words, we are short of the funds that we need to meet our obligations. And there is the BIG OLD COMPANY, with money in the bank and assets of all kinds easily within reach. And the defense against theft is only the employee's honesty. That is too tempting for some. That is abusing the trust that you have in your employee.

The answer is to set up access to company assets so that they are not easily appropriated by anyone - employee and owners alike. Most of the steps are simple ones like having all bank accounts require two signatures on checks and withdrawal slips. Making sure that the person making deposits to those accounts is not reconciling the monthly bank statements (unless it is the owner). Making sure that, as the owner, you open and go over each bank statement every month even if you do not reconcile it. Requiring a Purchase Order for each item purchased and spot checking those every month. And consistently reviewing and verifying all receivables, especially any which are "adjusted" or written off.

These things are all simple and they only take a little time each month after you have gotten into the proper habits as an owner. However, they make it much more difficult for an employee who may be going through a tough time to be tempted. Most employee theft occurrences are by employees who have been honest all of their lives, but who simply couldn't avoid the temptation that was in front of them on a daily basis. It almost always starts by the employee "just taking a little to tide them over" until the next month. Of course, "next" month doesn't happen because it was too easy and they are still short so it happens again... and again... and again! Remove those temptations and both you and your employees will all be better off.