As your business grows, one of the last things on your mind should be the honesty of your employees. Discovering one of your employees is a thief or embezzler can be devastating, but it can happen. When first starting-up, you pretty well know where every dollar comes from and where it goes, but as your business expands, so do the opportunities for embezzlement.

As a business owner, you owe it to yourself to protect your finances, and you owe it to your employees to minimize the temptation to steal from you. You say it can't happen to you? It happens every day! Here are ideas to minimize your becoming another statistic.

BEGIN WITH AN EMPLOYEE SCREENING PROGRAM
The applicant looks great on paper, and the references seem to check out; Before you say, "Welcome on board," but ask yourself: "What do I really know about this person?" A simple background check can validate your selection, and is well worth the few dollars it might cost.

"How much?" The cost of an employee screening will be somewhere between $15 and $100 per employee. Most good private investigative agencies offer this service, and they can guide you in determining the type and amount of information you need. The search is of public records only, but there's a world of information on us out there! No clandestine surveillance is used, but the PI knows where and how to look.

REMOVE TEMPTATION
Here's a rule. Never! I repeat, never permit the same person to post to an account they have collected! It is far too easy for an employee to collect the cash, record the payment in a general ledger, and pocket the cash. A clever thief working this simple posting scam has devastated many a business. The bad part is, you'll probably never discover the theft unless you hire an accounting firm to perform a comprehensive audit!

In a similar manner, never let the people running the cash register balance their own till. It will always magically balance! Have a second person run the totals from the registers and balance back to the person handling the money. Just about every cash register made today has this feature, and I don't care how small or large your business is; you need to implement this simple control.

HANDLING MAIL RECEIVABLES
Receivables should go to a lock box for which only you have a key. When your business is new it's okay to have the checks come to your business, but as you grow, you need another layer of control, the lock box. Make sure all incoming mail comes directly to you. Take out the checks, make a note on the envelope of the amount, check number, invoice, customer, and other information, then personally deposit the money. Let someone else post to the accounts receivable file from your 'envelope file'. Their balance should check against your deposit.

DIVIDE ACCOUNTING PROCESSES
All financial transactions are composed of at least two functions, handling the cash and posting the transaction. Make sure these tasks are divided between two individuals. For example, having one person list the accounts payable and another write the checks can reduce the possibility of over-paying a vendor with the expectation of a kick-back. Electronic posting is no panacea; a determined thief can outwit any computer.

MAKE REGULAR AUDITS
Yes, a full audit can cost a bundle. On the other hand, most CPAs offer a 'simple' account audit that is relatively inexpensive compared to what you could lose from a careless or dishonest employee. Ask.

Be especially aware of bookkeepers and other money handlers who seem overly dedicated to their job--even to the point of never taking a vacation. You may think you have a 'gem'. More likely, you have a thief! CPAs have discovered that announced mini-audits during vacation time keep mistakes to a minimum and most definitely will reduce temptation.

INSTALL AN OUTSIDE PAYROLL SYSTEM
As soon as possible, hire an outside firm to handle your payroll. There are just too many laws and regulations for you to trust this to either yourself or to an in-house bookkeeper. With burdensome state laws and extremely punitive IRS regulations, you don't want your payroll in the hands of amateurs, yourself included! In addition to the regular IRS pitfalls, a theft from your payroll account can cause huge fines and penalties, and you could end up being the one who goes to jail, not the thief!

UNDERSTANDING THE POWER OF GOOD RECORDS
It's almost redundant to ask you to keep good records, but many businesses, some quite large, are handled on the 'back of an envelope.' Keeping records this way not only opens you to the dishonest employee, but could cause you real problems with the IRS.

I suggest you bite the bullet and hire a CPA to set up your books, and then arrange for periodic audits. Your CPA will recommend one of the more popular computer bookkeeping programs, then work with you to help you learn how to use them. You can handle the day-to-day transactions yourself or hire an outside bookkeeping firm to do it for you. Either way is satisfactory, but do it!

WHAT ABOUT THE HONEST EMPLOYEE?
Set guidelines to remove temptation from the honest employee. Explain your policies to all employees, and you won't have the: "You don't trust me!" rear it's ugly head. Your employees expect fair and honest dealings from you, and you should expect fair and honest dealings from your employees. That's the way to success!