The possibility of employees stealing company money is something that most landscape business owners don’t want to think about. It’s one of those things that make a lot of people say that could never happen to me.
But the fact is, it happens more than most people realize. It’s estimated that workplace crime costs U.S. businesses as much as $50 billion a year. And research shows that on any given day as many as one in four businesses are being embezzled.
While most embezzlement cases do occur in the financial services field, every industry is at risk. And that certainly includes landscape businesses.
Just consider this one real-life case for example.
In 2017, a former office manager of a Palo Alto landscaping company was sentenced to five years in prison after she embezzled more than $700,000 from the business. Her scheme involved using QuickBooks software and a check stamp to write checks for herself that appeared to be made out to contractors.
Stories such as this one are concerning and it’s important that we learn from them.
What can you do to ensure you don’t fall victim to embezzlement? You’ve already taken the first step by reading this article and educating yourself. One of the best ways to defend against embezzlement is simply being more aware of what’s going on in your business. In addition, knowing and understanding your risk factor is key. We’ll explore what puts some businesses at higher risk and also what you can do to put critical safeguards in place.
Small Businesses at the Highest Risk
Unfortunately, studies show that small business owners are at higher risk of embezzlement than large corporations. Research from a 2016 embezzlement survey performed by HISCOX, a specialty insurance company, found that 80 percent of embezzlement occurred at small businesses (defined as those with less than 150 employees).
Researchers believe that one reason embezzlers would target a small business is that there are not a lot of checks and balances in place. In fact, maybe there are no safeguards in place at all. Thirty percent of embezzlements occurred because there were absolutely no internal processes to deter an employee from theft.
It’s also noteworthy that the research found that most embezzlement schemes are not pulled off by criminal masterminds. Instead, the stolen funds tend to be taken in small amounts, over a long period of time. Because of this, it may be difficult to detect.
Research indicates that most schemes go on for an average of five years. The average theft amount is $2.2 million during that time.
Employees Turned Embezzlers
Nobody wants to think about their employees stealing from them and it’s often hard to imagine that could even happen. However, because these are rarely elaborate schemes, the fact of the matter is that any employee could ultimately be an “embezzler.”
There is often a temptation to say an employee is “so nice” or that “he or she would never do that to me.” But those who have been stolen from often say that it caught them completely off guard. Many say it was an employee they never thought to be capable of stealing. There are even cases where family members or lifelong friends worked in business together and one ended up stealing.
The sad truth is: You can never assume it won’t happen to you.
But most people still believe they’d recognize an embezzler within their company. That’s largely because most people tend to think about this person as being a criminal mastermind. But research indicates the average embezzler tends to be a small business employee who is middle-aged and works in the office, usually in the accounting or finance department of the business. In 41 percent of cases, the perpetrators were female. Surprisingly, research has also proven that many embezzlers tend to be long-time employees. And only 7 percent of convicted embezzlers had a prior criminal history.
So how can you have any idea if your company is at risk? The truth is, you must just assume it is, and put safeguards in place. Research on embezzlement has also found that 78 percent of embezzlers had one or more of the following red flags. Of course, by no means do these red flags definitively mean an employee is stealing from you, but they’re still worth watching for.
- An employee suddenly living beyond his or her means
- An employee with financial problems
- An employee who is unusually close to your vendors or customers
- An employee with excessive control issues or who wants to do business procedures their own way
- A “wheeler-dealer” attitude
When it comes to something like embezzlement, it’s incredibly important to tread cautiously and never make accusations, even if you have suspicions. You must always assume the suspect is innocent until the facts prove otherwise. The last thing that you want is a lawsuit on your hands as a result of a false accusation.
Steps to Prevent Embezzlement at Your Landscaping Company
As mentioned, you’ve already taken the first step to preventing embezzlement, which is recognizing that it can happen to you. Becoming educated on the risks is key. So often, theft is a result of complacency and a lack of awareness of what’s going on in the business.
In addition, it’s also important to recognize that many cases of embezzlement tie back to check fraud and false billing. This is why it’s beneficial to have a separation of duties when it comes to financial services. In other words, the employee who writes the checks or handles payroll should not be the same person who is reconciling the bank account. It is a smart business practice to have more than one employee involved in the finances. Leaving all of that in the hands of just one person does not make room for accountability.
The type of landscaping accounting software that you use can also be a potential help or hindrance, depending on the program. That’s because certain software programs will allow you to break an audit trail. That means that your bookkeeper could go into the system and change the name on a check after it was already written. When the deposit clears, the business owner would have no way of knowing that bill wasn’t paid to the original vendor.
But with a landscaping accounting software program in which you can’t break the audit trail, there is a safeguard in place. Your bookkeeper can’t just go in and change a transaction description once it has hit the general ledger because there is no way to override that information.
Comprehensive landscaping accounting software should also record a detailed history of financial information. That means you can view when an invoice has been posted, if it was voided, if it was erased, and so forth. It makes it very difficult for someone in your company to hide information.
You can also take some steps to discourage your employees from even considering stealing from you by running background checks when you hire, performing periodic “spot checks” of any financial services performed by your employees, and refusing to ever sign a blank check.
Many business owners are worried about hurting their employees’ feelings by putting these types of measures into place, but an honest employee would understand the needs for checks and balances to protect the business.
Your Choice in Landscaping Accounting Software
When choosing landscaping accounting software to help run your business financials, it’s important to research whether the product will add a layer of protection to your business or not.
With Asset, we are compliant with GAAP (Generally Accepted Accounting Principles), which are a set of rules that encompass the details, complexities, and legalities of business and corporate accounting. GAAP compliance makes financial reporting processes transparent. But not all landscaping accounting software is GAAP compliant, nor are some of the leading general accounting software products which thousands of companies have been using for over a decade!
It’s also important to note that with Asset, you cannot break the audit trail. If your business is using a landscaping accounting software product that has these types of measures in place and an employee is refusing to use the program (we’ve heard of this happening among our own clients), then that should be a definite red flag that there could be an issue.
With the right product, it makes it increasingly difficult for your employees to steal from you and that’s a huge benefit. Your smart choice in landscaping accounting software can go a long way in protecting your business.
If you’re ready to put more safeguards in place and want landscaping accounting software that will help you deter theft, then let’s explore and see what Asset could do for your landscaping company.