Bullet Proof Your Business

The Dedicated Employee

How many times do you hear a business owner bragging about how good his accounts person is.

‘Rod’ from accounts was the cornerstone of the business. He allowed Jeff, the owner, enough time to play golf every Wednesday, and take clients out in the boat on Fridays for lunch. Jeff frequently extended his weekend away with wife and kids, because he knew that Rod would cover everything for him. Rod never went sick. He was there every day. He worked back and came in on weekends. Rod’s responsibilities included all facets of the accounting side of the business, which included:-

• Paying all accounts by cheque or internet transfer
• Issuing all invoices
• Imputing and up-keeping the books of account
• Liaising with the company accountants
• Banking
• Mail Collection
• Wages, Superannuation and BAS
• Numerous other Administration matters, including telephones.

From time to time Rod would always tell Jeff what was going on, but he never provided him with formal or written reports. There was no need. Rod had a good business. 12 staff, a large volume of work that kept everyone busy. It was now turning over $2.5M a year. Jeff was able to draw reasonable income and pay his bills. He still wondered however, why there wasn’t more left on the bottom line.

One day, the Taxation Office telephoned the office and coincidently spoke to Jeff. They advised that they were doing an audit of a person’s income tax returns. This person was unrelated to the business. Her tax file number indicated income received from Jeff’s business. The Taxation Office wanted to confirm this and also identify the account number it was being paid to. Jeff quickly advised the Tax Office of their mistake, knowing that a person by that name did not work in the business. They reassured him that they had been receiving group tax with respect to all employees which included the tax file of this person.

When Jeff asked Rod about this he was evasive and changed the subject. He then went to lunch and never returned.

Jeff started to conduct an audit of his books of account and hired external book keepers at a cost of $12,500, to assist and rectify what seemed to be numerous book entry inconsistencies.

After months of investigation, taking him away from his normal business he discovered the following:-

• The Tax Office were correct. The business had been paying a female employee $45,000 per year plus super, by way of internet transfer. Investigations revealed that this income was transferred by way of direct debit to a bank account controlled by Rod, and that the super payment was actually being paid to Rod’s super.
• Invoices totalling $22,300 had been paid by the business for construction work on Rod’s home.
• The business was paying for a non approved ($676 per month) vehicle lease. Investigations revealed this vehicle was owned and driven by Rod’s wife.
• A supplier had been submitting invoices for the sum of $5500 per month for 26 months for goods that were never provided.
• The books of account were in a terrible state with approximately $60,000 recorded in a suspense account. This took considerable time to work out and during this time no statements of account could be forwarded to debtors.

It was now obvious to Jeff why Rod never took time off and insisted on performing so many tasks.

After being engaged by Jeff, we completed the following:-

• Investigated the situation, analysing records and taking statements, and prepared a brief of evidence.
• Liaised with local Detectives, providing the brief of evidence. Rod was later charged with 67 counts of Misappropriation of Property, and 46 counts of Fraudulent and False Accounting. He received a two year term of imprisonment.
• Conducted investigations to establish and identify Rod’s assets, including bank accounts.
• Liaised with lawyers who instituted civil proceedings against Rod. An application for Injunctive relief was successful and an Injunction placed on all property owned by Rod. A Judgement was later awarded to Jeff for the sum of $256,487 including costs. Rod’s home was sold and upon settlement, this amount of funds was provided to Jeff.
• A complete analysis was conducted of the business and all risks identified.
• Over a period of 8 months risks were treated with risk management solutions. The most prominent solution was to segregate all accounting tasks. Individuals were assigned to separately undertake the follow tasks:-
• Mail collection
• Invoicing
• Banking
• Book keeping (Contracted to input and produce reports only)
• Account/Wages payments.
• Further and better procedures were instigated, including account payment authorisation process, which provided the business with accountability and transparency.
• Weekly reports were produced by Book keepers and analysed by Jeff.
• All Contractors were analysed/investigated and agreements entered into.
• A formal system of Tendering was instigated.
• Jeff’s HR system was dramatically upgraded so that employees:-
• Were formally Inducted to their duties;
• Issued with a formal letter of offer, which included Conditions of Employment, Code of Conduct, Ethic’s Police, Internet Usage, Hazard and Complaint Reporting;
• Executed Confidentiality and Non Competition Agreements.

In summary, Jeff is now enjoying greater profits. He is back in control of his own destiny. He manages better because through business risk management systems, he can accurately measure every aspect of the business.

Bullet Proof Your Business – Because Business Risks don’t wait.

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