If you are in business for yourself, it is important that you “keep your eye on the ball,” especially in today’s economy. What does this mean? It means watching all aspects of the business closely, particularly the financial end. I just read an article in the TradeOnlyToday’s e-newsletter about a long time employee of a Florida marina who bilked the company out of $243,000. That is a major hit on the bottom line! The employee had worked for the marina for over 20 years and was considered to be part of the family. How sad it must be to have such trust violated by an employee. The employee who embezzled the money was the office manager for the business and she was authorized to write and sign checks on several of the marina’s bank accounts. Huh? Apparently a lot of the checks she wrote over a 7 or 8-year period ended up in her pocket. Where were the “checks and balances” in this situation? I’ll bet the marina owners are monitoring the financial end of the business closely now.
One of my older brothers, who was quite an entrepreneur, bought a run-down Lincoln Mercury dealership on what you might call a financial “shoestring.” He did not have a lot of operating capital when he bought the business and borrowed a lot of money to get started. But Jim was a great motivator, a fantastic salesman and it was said he could sell snow to Eskimos. Soon he was selling new and used cars in increasing volume and began to build up the business and his operating capital. Or so it showed on the books. His big mistake was focusing mostly on sales and not keeping an eye on his office manager/bookkeeper, an accounting-type guy he trusted completely. Very big mistake! He didn’t keep his eye on the ball!
It turned out that my brother’s office manager embezzled a large amount of operating capital from the business during the first couple of years in the business. I don’t know all the ways he stole the money, but we learned one of his tricks was to take accounts receivable checks to the bank, cash them and put the money in his pocket. He then marked the accounts paid. Eventually my brother discovered what was happening, at which time the office manager suddenly disappeared. Charges were filed but none of the monies were ever recovered. It was a major setback for the dealership and almost put my brother out of business. But he got his team together, told them what had happened, and they all started selling cars with even more enthusiasm to help turn the business around from the big theft. And they did. He hired another office manager/bookkeeper who turned out to be very honest and honorable. But my brother and his CPA monitored the financial aspects of the business much more closely after the big embezzlement. And 30 years later my brother sold the business for a ton of money and retired.
After I retired from OMC, I bought a Chevrolet dealership about 30 miles away from my brother’s Lincoln Mercury dealership. When a successful businessman I knew learned that I had bought the business, he gave me the following very simple advice… “Keep your eye on the ball.” I knew what he meant. And, of course, my brother gave me similar advice. So in my dealership, all the incoming mail came to my desk first so I was able to see all accounts receivable checks. And I also signed all the accounts payable checks. No one else in the business had the authority to sign checks. In addition, my CPA did a monthly internal review of the dealership books so he could spot anything that might look fishy. Fortunately, with the checks and balances in place, I had no problems like what the marina mentioned above or my brother encountered.
So my advice is, “Keep your eye on the ball,” and watch the financial end of your business closely. I am hopeful that most of you already do this.