Prefer to read? (Transcript)
Speaker 1 00:13 Hello there. Good morning. Happy Saturday. You are tuned in to business Leon, talk with Leah and Claudine. Uh, today is Saturday. It’s 10:00 AM what’s up? not too much working, working and we have some good stuff to talk about. Yes. Wait. Wow. Hey. So, um, how you been? I have been fantastic. Ben fantastic. Had a great um, holiday weekend. Um, and really just digging in. Digging in summer is really going to be around the corner and um, we’re actually planning on 4th of July weekend already. Oh yeah. Are you guys doing four day week, four day weekend? Yes. Yes. Um, gosh, we just came back from being out of town and I’m in planning already. W my, my family is a planning family. We have stuff booked for like Horley. My sister does that. Hopefully she’s listening, we’re planning it. Shout out to my sister who we literally sits down the first day of the year, like January one, two and she plans everything with a calendar where I can tell you where we’re going to be next summer.
Speaker 1 01:17 I already in 2020, really going to be in Orlando. Really already live there, booked really well. Long story, I’m not gonna give fill you in with the drama, but yeah, we’re so there’s a lot going on and um, family is, you know, just great and uh, business is good. Um, a lot of feedback. Uh, thank you so much for the emails and the phone calls and I even got a text message the other day or that’s great. Um, Claudine, I know you’re getting some feedback. Yeah, the show is working. Thank you for supporting the show business. Illegal talk with Lee and Claudine and um, we started to kind of get a pretty good idea who listens to this show. Right? Which is really cool. So, um, we know that, um, most likely you are a business owner or want to be starting a business and you tuning into the show to understand all the shenanigans that we’ve talked about, you know, the business and the legal stuff and the opportunities.
Speaker 1 02:13 Uh, entrepreneurship. We also know that you live, uh, in and around the area, um, and that you commuting, that you’re very busy, um, that you’ve got a lot of things to do. And you have chosen to listen to our show. And so we want to make it actionable. You know, this is not w w this is not like gossip and on the news, this is like running a business. Right, right, right. This is not, um, my, my friend kind of said that we should do something like this. You know, um, you hear this story when people will come to me and they’ll be in the process of implementing something, you know, really where, where, where’d you hear to do that? Oh, well I was talking to my friend of mine and I what is your friend? I’m a CPA. No. And so, um, it’s good to go to people who actually practice in the area. They preach
Speaker 2 03:00 well what they preach and crazy, crazy talk. What? Woe me Dodge a test. You’re not just a doctor on TV, right? No. And so, so it’s good to, to really surround yourself with people who are in, in the area of business where you are looking to either grow or get advice. So, you know, I think the kind of old adage is don’t go to the plumber. Um, if you have a broken arm, go to the people that people who are doing, doing that area of business that you need help with or need advice or perhaps you recognize it within yourself that that’s just an area that doesn’t appeal to you or you’re not really great at. We all know that, you know, that would be why I work with you because I don’t like numbers and I’m not fond of them and don’t really care too much about them even though I know how important they are.
Speaker 2 03:50 Um, so I make sure to ensure that I am working with somebody who loves what he does and does it well and can guide me down the road. So we are going to tip toe into a completely different subject today. I know I’m a little scared you should be because this could get you in trouble. Let’s not let you do this. Yes. Tell us about it. Employee theft. Oh, and what does employee theft mean to a business? Probably is never gonna happen to you, right? If you’re listening to the show, Oh, maybe no it D you know, B because it is true. Um, you know, even stealing pens from the business is theft. It is true. Um, although I’m, you know, I’m not sure too many of us care about it. We kind of look at the, that kind of stuff as the cost of doing business.
Speaker 2 04:36 Um, but employee theft is a huge, huge issue. And, um, there are things that fall in that category that I think a lot of people don’t recognize that. And um, um, I years ago worked for a nonprofit that, um, had a call center and the employees, um, logged in to their computer systems when their shifts started and if they got up to leave to go to lunch, take a break, you know, whatever they, they log in and out of their computer system. Um, and because then, then the phone calls wouldn’t come to that computer. It would go to somebody who’s sitting at their computer. But what it did is it gave the company the ability to really count everybody’s minutes and productivity and how many calls did you take? It was like the hyper version of, um, employee management. And it was super unsettling for me. Um, it was like, you know, a great exposure.
Speaker 2 05:31 Um, but certainly that’s not how my personality, um, what was it natural for my personality to manage employees to that extent and, and literally have reports run on a biweekly basis of how many minutes each person took on their bathroom break or their lunch break, you know, how many people were spending, how many minutes? Um, and then what did those minutes results in, um, with each client that they were on the phone with. So there are variations of it and I kind of go down that road because, um, and that environment, what we were looking for were people who steal time. Wow. And, and that is really the, a big nebulous, because not area, most businesses don’t have the ability to track employees. So to that extent, that was just a unique business that had a unique set of circumstances. But you know, certainly in my business it would be for me to track every minute that one of my staff members was, um, not completely focused on their work would require me to dedicate a tremendous amount of time, probably more so if they, if they were not focused on their work and say they’re on their cell phone or, or, you know, taking care of her personal stuff, um, during work hours for 10 minutes, it would re probably require me 15 minutes to track that, figure it out, document it.
Speaker 2 06:56 So it becomes a very difficult thing for business owners and managers and key personnel to deal with is stealing time. And that’s just one of one of the,
Speaker 3 07:07 you open up a Pandora’s box of, of just, I mean, that alone I’m on, I’m going to say is, uh, you know, we have a lot of notes and stuff to go over with today. But on that note, um, one of the ways, one of the things that I do, and I think I’ve said this before, I know I talked to you about it when I’m looking at a set of financial statements, right? Uh, for a company, I start with the profit and loss in the first thing that I look at within the profit and loss is the gross profit as a percentage of sales, right? Right. Then I look at the expense line and within the expanse line to below the line, I’m looking at your staffing, your wages as a percentage of your sales. And every industry has their own metrics. Um, acceptable metrics.
Speaker 3 07:58 Some are 30, some are 35. Here are the professional services, you know, like Y colors, you know, doctors, lawyers and use to have a little more than the average in that. Like if I’m expecting 30% of sale, um, you know, as a percentage of sales for you, for your staffing, it would be a little higher or if in the professional services side. But anyway, that is the first area that is the most costly area of your business. Second is you rent, right? So you’re saying is that if I take a company who’s paying on is $2 million, right? Regardless of the revenue, thus $2 million that you as a business owner is spending in paying your wages and you know you have to deal with the compliance. How much of that $2 million is really
Speaker 2 08:44 producing the revenue, right? Is that what you’re saying? I am. Absolutely. And we’re taking it right there. Oh my God. You put that knife right through it right there. Right from the very beginning. And how do you deal with it? What is, what is it you, you did
Speaker 3 08:57 you, there’s a lot that I do but to Fise to say, um, we’re going about to go into a break. Maybe we come back to it. This is just a whole nother show just to talk about it specifically when you are actually an employee that it should be working. 40 hours is only working 20 but you’re paying for 40. What if their salary and that’s, how do you deal with that? So, so many people in so many ways that we can go there. We can, we’ll talk about that after the break has salary is a whole nother challenge. So what, okay, so what, or which way, which lens do we want to go today? So we’re going to talk about employee theft, truly employee theft as a missing money or, or stuff, right? Um, and what, uh, stay tuned because we’re going to talk about what is the, that too, you’re not just for your business but for the economy and what does it cause the U S and what does that turn into? Tax dollars. So there’s a lot to cover on. Employee theft is not the most convenient and most rosy topic, but it’s one that is important on the less. So stay tuned. We’ll be right back. Business legal talk with Leah and Claudine
Speaker 4 09:58
Speaker 3 10:32 Hey everybody, welcome back a second segment here. Business and legal talk with Ian, Claudine, uh, we’re talking about employee that, so before we get into the thick of it, you got some stats for us there, Claudine?
Speaker 2 10:46 Yeah, absolutely. Well, how bad is this? It’s okay. So let’s just go through the, the top five, uh, thefts that, that, that w businesses incur. Money is, is the most common assets stolen, stolen from employers? There’s no question, it’s it, you know, if it’s laying around and if it’s out there, you, you risk the potential that it’s going to get stolen. Um, as we were discussing before, the break time is the second most stolen thing from an employer is time. And to me that’s a really interesting one because it’s really difficult to identify. It’s incredibly difficult to manage and, um, you know, just how much micro-managing do you want to do on your employees? Um, to the extent that, you know, are they wasting time? So supplies and that’s, you know, again, w I think we mentioned that last, um, that last segment, pens, paper, um, just stuff from the, from the employer company, merchandise company, pro property.
Speaker 2 11:47 So if your company sells products, if you’re a retailer, you deal with this upfront. And so as a retail company, merchandise is probably the number one thing. Um, and I think these, these were kind of just listed in general, um, order of overall not, not industry specific. And the last thing, and this is something, um, we’re really, really dealing with is information. People don’t realize, um, what intellectual property is. Um, they don’t understand what trade secrets are. Um, trade secrets are anything within the company that is not publicly known. So that is client list processes if you have created for our office, for example, vendor relationships, et cetera. We have intake forms for different, different areas of business. So if I have somebody coming in wanting to do a living trust, we have a particular intake form for them that we’ve created. That’s part of our process.
Speaker 2 12:44 And so that is trade secret. That is company property. If you walk out the door and you take a copy of my intake form and you make it yours, you’ve just stolen from me. So if you are, say a staff member at my business and you leave to go to work for another company and you’ve taken any of my forms, my processes, um, did some really interesting research on this and I won’t, I won’t go too far down the wrong rabbit hole, but um, there is an idea that has been, uh, they have attempted to float here in California that works in other States but not here in California is the idea of an inevitable disclosure. Um, disclosure. So when we’re talking about nondisclosure agreements and, and confidentiality MBAs, yeah. When, when an employee comes to work for me, they sign an NDA or a nondisclosure agreement, you know, agreeing to not disclose any of our internal information.
Speaker 2 13:41 Let’s just say the employees worked for me for 10 years or, and, and over the course of 10 years, that employee has gained a tremendous amount of knowledge just by working. So they know things that we’ve tried as a business that maybe have worked, haven’t worked, and there’s just a volume of knowledge that if that employee, he left and went to be, say an office manager left me as an office manager and went to be an office manager for another law firm. Then what? There’s a certain amount of information that is just going to be inevitably disclosed that in order for them to perform their job right, certain things that they, that that company may try and they would say, no, no, no, we’re not going to do that because I’ve tried it at my previous employer and it’s a terrible idea and it’s not going to work.
Speaker 2 14:27 And I can tell you why it’s not gonna work and so on and so forth. So California has a position that we don’t want to restrict employees moving about in the workplace so they can go to one company or another company. And so we, we don’t do non-compete clauses and we don’t do inevitable discovery or disclosure where, where we say, you cannot leave me as an office manager and go to ABC law firm down the street and work as an office manager because inevitably you’re going to disclose something. So I’m going to prohibit you from taking that job. California doesn’t do that. Other States do. The federal, even federal courts in California have expressly, um, IM empowered that concept. Um, our state courts don’t do it, but it was an attempt by businesses to say, no, I don’t want you going to work for my competition after you’ve been with me for 15 years and you’ve gained all of this knowledge and all of these understandings of processes and procedures. And because I know there’s no way you could possibly perform that job over there without,
Speaker 3 15:32 without fully utilizing the knowledge that you learned over here. Right.
Speaker 2 15:36 Um, so just kind of an interesting thing. Information is a huge, huge, huge subject in the, in our, in our legal world. Um, and, and disclosing it and stealing it. And, and, and, you know, we’re, we’re really hearing a lot about it, um, on the national level, um, with China.
Speaker 3 15:53 Right? Right. So you asked me about the money part, right. And an a break. So here’s where I get involved. Um, I don’t necessarily look, um, this type of thing just kind of falls into my lap from time to time. It’s rare, but when it does happen, it’s a big thing. Uh, forensic accounting, right? Um, typically forensic because, um, you’re looking much like real forensics, you know, where there’s murder and then you try to, uh, deconstruct what happened and you’re looking for the smoking gun and you’re looking into who did it, you know, the DNA and et cetera. Well, the same applies in accounting. Um, when there is money, there’s theft that involves, uh, money. Um, there’s usually a paper trail. There’s usually something that was left behind crumbs that are left behind by the person that is, it almost is very, very difficult to completely hide, um, theft.
Speaker 3 16:51 That involves you currency. Yeah. So where they’re not actually firms that only do this, they specialize in four and six. No publicly traded big, big stuff, right. What I have come into, um, contact or have worked when situations with their, his two partners don’t like, they started like, you know, I remember the whole thing. One was the technician was this salesperson, right? For instance, there were children, you know, childhood friends started a business and things started out great until they weren’t, and they have problems and the inside had and have fallen out and they started not trusting each other. And one decided to, uh, even though they were 50, 50 partners, uh, with equal voting rights, so they couldn’t give one money without giving to the other, right. That right. Well, this person is, one of them said, well, there’s a better way or there’s a alternative.
Speaker 3 17:43 And then basically manufacturer a vendor that think about it, right? So, you know, curse of paying business. So there is an accountant, right? Or there’s a bookkeeper in house, right? Or somebody who is not trained or who started as a receptionist. We became an office manager who is eventually cutting checks and having one of the owners signed. Right? Somehow a, this vendor came about. Nobody questioned it. Nobody ask. Um, the proper information. If you’re a vendor, fill out a w nine form, try connected us. This is truly a vendor, uh, going through the whole process and did our accounting processes and procedures that you do to ensure that the theft, like this doesn’t happen in this case E a just a, just basically when below the radar. So one of the owner’s studies signing checks to this vendor to the tune of, you know, 30 grand a year over two to three years.
Speaker 3 18:32 So 60, 90 grand, we’re missing until something bad happened and then one check bounce or something happened and and then they needed a second opinion and that’s when we come into play. Right? So it’s ugly. There’s legal stuff and then we have to produce, I have to look for and, and really connect the dots. So whatever suspicions there are about and they become clear, it becomes evidence in a court of law. Right? So it’s embezzlement row. Absolutely. So that’s how bad he can get on the money side into, into, and this is when owners are involved. but, but, but I don’t know if we have this stat here and this is something that I knew 80 PR, this is a stat that I knew because I, I’ve, I’ve, I’m aware of it before at , I’ve studied it before, 85% of employee theft is brand new, meaning that the person never really stole before in a prior job and they had access to cash.
Speaker 3 19:24 Really 85% of all theft by employees is first time first-timers. Wow. I would have never guessed that. I would’ve never guessed that. And you know why opportunity, desperation and opportunity, the person that even if you watch shows like American greed, you know that, that that presents the outliers, that 10% are just criminals. Right? Right. Most people are not criminals. They’re don’t start out that way. And innocently, you know, you can argue this as a single, you know, parent who doesn’t have enough money and they cannot make it to the next paycheck. And you use innocently says, you know, I have access to the bank account. You know, I can write myself a check when you don’t have systems and procedures. So the same person that cast the checks, um, signs the check or the same version that puts the vendor, pays the vendor, all of that happens and that person notices that that is missing and it’s under duress and they don’t have money to pay the rent and they’re about to be evicted. And you can argue, Oh my gosh, is going to take this thousand dollars and I’ve promised to bring back. Nobody’s going to ever know what happened. And until next thing happens, pretty soon the, and I didn’t have $1,500 for this. And DASA people end up embezzling hundreds of thousands of dollars over a long period of time. Absolutely. And when I’ve come in contact with it from our end, it has been employees who make the, and this, this goes back to, it’s really important
Speaker 2 20:48 to figure out a way to have good employee employer relations because the employee that justifies it because the boss is a jerk or the owner’s making all this money and I’m making, you know, pennies. Um, I’ve heard that before. That’s it. Once the person can justify it. We had a client recently, actually about a year ago, um, who had an employee at, actually it had been become the culture of the business where they had many, many longterm employees, like 20 plus years. Many of them and probably the top five were all 20 plus year employees. Barron’s, um, and one employee because it had been run very friendly, very family oriented. We never suspected each other. We never, we didn’t put systems in place to, um, you know, red flag if things like this were going on because we didn’t want our friend to, you know, feel awkward. and we wouldn’t want to ever suspect so and so whatever, do something wrong.
Speaker 2 21:49 So, you know, we wouldn’t make them sign in, sign, sign in and sign out and so forth. Um, employee, he had been embezzling as she did human resources. She also did, um, payroll. She also signed checks. Um, she approved payroll, she approved all the 401k, you know, entries, um, who got what percentages and there was really no oversight, um, until um, some management changes, a new person came in and somebody went, wait a minute, that that just doesn’t seem right. And I’m sure enough got to looking into it. Um, person had been been, um, giving themselves raises for a number of years, unauthorized on top of the raises that they were already getting. Um, Nope. Nobody knew. So it’s really, it’s really important to have employer, employee relationship. And that means yes, we work as family, we care about each other as family, but it’s okay to have processes in place that, um, that will red flag that will, you know, be a trip wire.
Speaker 3 22:56 Okay. So here’s some stats that I want you guys to know listening to this show. So business illegal talk with Leon Claudine. So listen up businesses lose 20% of every dollar to employee theft. So this is considered considering the statistics from the American society of employers. So this is nationally at a national level. That’s just crazy numbers. 20% of every dollar. So 20 cents for every dollar that goes your profit. Well, what way? Well, what’s the, what’s the number on 2 million? 400,000. It’s a lot of money. 20% of employees are aware of fraud at their companies, including theft of office items, false claims, hours work. We would just spend time talking about that and inflated expense accounts. Uh, this whole experience, uh, expense reimbursement. It’s a big, I mean technology,
Speaker 1 23:46 you know, um, um, would there is a need somebody who will step up and try to field that need, right? Um, software that is detected to, to kind of handle this whole thing about, um, employee expense reimbursements and tracking. So 55% of perpetrators are managers. 44% of workers say the company could do more to, they’d even say themselves, Hey, you guys are a little too loosey goosey here. You could tie things up here. Um, the U S retail industry loses 53.6 billion with a B a year due to employee theft. Retail gets hit hard. Boy, they get hard hit man and I, okay. So whatever business you think you’re about to start, think carefully and think twice before starting in the retail world. Uh, this alone should scare you. Employee theft is just as ramp ramp and, and then you have, um, companies that actually hire securities just to be outside of the store.
Speaker 1 24:42 Who, who do you think is paying for that? That’s not the mall, right? That’s the employee. That’s the actual employer. That’s the business. Well, last prevention in your big retailers is huge. I mean, that’s a huge portion of what they do. And does that stop theft? No, no. We’re not allowed to know. And particularly in California, your big stores don’t attempt to stop shoplifters. They don’t attempt to stop them. They track them. They’ll call the police if the police can get to the parking lot. By the time, you know, they may distract him and stand and talk with them. But if somebody is actually actively, um, stealing stuff, they, they’re told hands off because of the liability we just had here in Sherlock, three gals come into the ultra makeup store and literate with bags and literally just grab, grab, grab stuff off of the end.
Speaker 1 25:29 They got caught. They just recently, I saw their mugshots today. So you’re saying that if I’m the shop owner and I see people sending, don’t try to stop him because they may Sue you because you heard him on the way down. Whether was trying to stop him for stealing your stuff or probably not so much that that too. But you’re talking about workers’ comp claims. Oh look. So if your employee gets hurt in the process of tissue injury liability and then, okay, wait a minute. Hey, there’s so much to talk about. So Hey, you’re listening to business and legal talk with Leah and Claudia and stay tuned. We’re going to break. We’ll be right back.
Speaker 4 26:03
Speaker 5 26:18
Speaker 4 26:23
Speaker 1 26:41 all right, well we haven’t too much fun. You know, how
Speaker 2 26:44 can we make such a boring topic? Fun is just us talking about it. So, Hey, you’re listening to business and legal talk with Leah and Claudine. We’re talking about employee theft and what pervasive, um, this is, you know, and how it permeates through all areas. Um, all businesses, it does not discriminate no matter what industry you’re in. So, Hey, Claudine, do you want to, yeah, so this is really, really important because you know, either you have a business where you’ve figured it out after the fact that you know your employees have been stealing from you or you know, they’ve left you and when they left, they, they took half of the business with them and you’ve already been bitten by it. But this is like the call to, to action. Stop and think about your business. Whether you’re in a service business like mine or whether you’re in a product retail business, you have to put in place particular provisions, um, so that you will have those red flags come up or you’ll have the, you know, the wire trip, so to speak, when you know, to, to alert you that these things are happening.
Speaker 2 27:50 And it’s interesting because you were just talking about an 80% role. I actually did say 85 but, Oh, but I did not know that you had this notes here. No. Do you want to read them? You didn’t know. And so here we go. We’re gonna. We’re going to validate. Yeah, you’re crazy. You’re not crazy. And you’re, you’re, you’re telling it like it is. So that in many companies and people who do fraud prevention have operated by what they call the 10, 10 80 rule, which says that 10% of employees will never steal. 10% will always steal and 80% will go either way, depending on the opportunity. That just is mind boggling. Yeah, it’s mind boggling. And I, I had, I had somebody who was talking to me about this. In fact, we in prep prep preparation for the show her, her and I had a long conversation about the subject and she owns a business as well.
Speaker 2 28:47 And had recently gone to a function and seen, um, that somebody else who was at the function had taken a number of products from her business and they were now at a third location and she never had permission to take these products. And she was at this, you know, completely not a non-related function and saw a whole bunch of her products there and thought, Oh my gosh, how did, how, how did these end up here? And then realize that one of the, when my brand bruh with her brand on it, and that was the first thing I said, I said, are you sure they were yours? And she said, yes, they’re stamped with my company logo on them. And I thought, wow. And the realization and this person, this person is a, is a friend. And, and how do you deal with that and, and how do you go with it?
Speaker 2 29:39 Is it, well, I think the first thing is you have to assess, is this a person who’s maybe just overstepping their friendship boundary? Like coming to your house, having a cup of coffee, you’re out maybe in the yard having a cup of coffee and they walk off with a blender. Know, walk away with, you know, you’re having a cup of coffee or maybe you, maybe you have a couple of drinks and it, and you get in the car to go somewhere and they walk off with your cup and a week later or they come back, Oh, Hey, you know, I ended up, ended up with your coffee cup. I was on the phone and I didn’t know I had it. Technically, yes, stealing, um, theft technically, I suppose. But it was a friend who basically overstepped their boundary. And is that the case with an employee? Is that just an employee who maybe didn’t really realize that this was a no, no, that is that even PO, I mean, call me.
Speaker 2 30:32 I mean, I have a ton of, I, I, I like to think I have a moral Kompass and I know what’s right and wrong, but to take something that doesn’t belong to me just spells trouble. You know what? There’s employers though that are very, very generous and have been generous to particularly that you have a longterm employee and the longterm employee, he says he would give it to me of, Oh, you know, he wouldn’t, he wouldn’t. Objective entitlement. Well, I’m not saying, I’m not saying it’s okay. I’m not arguing and I’m not arguing in favor of this, but I’m just saying this could be the mindset as opposed to the employee who is intentionally trying to steal from you, who is essentially innocent and misguided, misguided. It’s misguided. And so, you know, what do you say to that person? You have to say something. You absolutely have to say that stop doing that.
Speaker 2 31:22 This is not okay. And it, you know, and in my opinion, and if I was to counsel at a client who was dealing with this, I would absolutely say, if you’re not comfortable having this conversation with the employee, call me. I’ll have it. Um, because we do that and I’ll sit down with the employee and look them directly in the eye very clearly and without any uncertain circumstances, we will discuss it at length, explain where it is not OK. and we will not do this again. Um, but so many employers have a hard time having those tough conversations. And I’m telling you, if you’re one of those out there and you’re listening to this now, no, it, the conversation has to happen. Even if it’s not today, call us. We’ll share on-law.com or you can call your accountant who would be perfectly happy to explain the forensic accounting and how this doesn’t work on their friends like accounting side. But it’s very interesting that um, managers account for 55% of employee theft. Right. Does that surprise you? No, me neither. You know, I’ve, I’ve counseled, I’ve been part of terminations or master munitions and layoffs or firings and multiple companies over many years. And, um, one
Speaker 3 32:40 thing that it’s always sort of the, the, the common thread is with long term employees where the boundary line between friendship and employer employee relationship is blurred. Yup. So I always advise, you know, and particularly as you move up in the company is do you, I’m asking the owner, um, you know, when do you know they’re not longer an employee or they are, I mean, how, how do you handle that? You know, people that actually go on trips or deficient trips or do stuff that, as you know, how do you manage that is not easy. Right? But then you have people who think they are, they start doing things bought that he wouldn’t mind because we’re friends. Right? Yet legally you have a responsibility, a legal responsibility with this person who happens to be an employee and you have all these responsibilities. So it’s really hard to just be friends with somebody. Don’t you think
Speaker 2 33:37 it w and we mentioned this a while ago on a previous show about the, the conundrum of being the CEO or the owner of the company and that you’re, you, you feel like you’re constantly in this corner where you want to have your employees treat the business. Like they own it. I think we’ve all said it, right. We want the employees to be invested in the business and, and, and have some, some ownership, you know, at least feel some sort of, um, you know, responsibility to that business. But at the same time, they w w when does it cross the line? So for example, we had a conversation in our office recently, um, that I definitely am particularly because I employ attorneys who, you know, are there, their whole entire existence is to give opinions. So yeah, I do, um, involve the, um, folks in my office with a lot of the decisions I am thinking about doing this or what do you think about that?
Speaker 2 34:39 Or, you know, this is what I want to do. You know, what do you think of this contract that I’ve drafted or, you know, do you have any opinions? And so, but at what point does, does do the employees begin to take over more and more quote unquote ownership and start to act like and perform like and pretend and then maybe feel entitled to some extent that they, if I don’t follow their lead, if I don’t do what they recommend, you know, because at the end of the day I have the final decision. Um, and so when you’re, when you’re setting up those relationships is really where you start to tip toe over this line and you really start to treat employees. They’re family, we care about them. We spend so much time with each other, we genuinely do care about them. But at what point do they be come start to act like the owner of the company.
Speaker 3 35:33 Mm. How do you balance that? Um, I think I always have to remember for me, I have to be, remember I have to be aware of my surroundings at all time. If I’m the owner of the company, I always earn this side of caution. Um, I, I, I have, you know, prior to starting my own company, and this is my fourth company, I was higher level executive, a multiple companies and uh, there’s a protocol. There’s a way you conduct yourself. I, I’m just trained to think that way. Never be too cautious, uh, too careless. Uh, even in social settings, you know, you have two people that are in management. You have to be very careful because in some of the things, things can be misconstrued in the media as if used, if the shareholders say it. Um, so the way you consumed, uh, colic beverages or not, it’s a big deal when you’re an employee of a company and, um, it starts as little as that.
Speaker 3 36:31 And also how you conduct with others, how you, um, never give the appearance of misappropriation of anything. Right. So that to me, is that how you set the boundaries of the, you have to be first and foremost, if you’re the CEO of your company, be a professional. I think if you are that and you can put those boundaries, Atlanta relationship, I think people act when there’s gray areas. Correct. That’s called opportunity, right? They’ll create opportunities. Um, I can only speak them, you know, in my, in, in the accounting side, I always advise when I walk into an accounting department and I’m asked to oversee the accounting department, I’m always looking was how quickly can the money leave the company when the owners not knowing, right? It’s like I’m hacker trying to get into a company, figure out what is the weakest point of entry. Right?
Speaker 3 37:22 And then fortify it and then fortify it. So that doesn’t happen. So I’m looking for ways for the trail of cash win, win, win money. It’s paid to the company. How does he make his way to the bank? When money leaves the bank from the company, how does it make way to the vendor if there’s any opportunity in between for any anyone to take advantage of it, remove those opportunities. Right. That’s how I come about. And that is done through systems and procedures. Multiple people, multiple check signers, two check signers and big companies where one checks on the other, the person that that’s um, the entry of accounts payable is not the person that cuts the checks. Right. Don’t know the vendor. So they have to lean the, there’s multiple points of failure. Never want to have a single point of failure in your accounting.
Speaker 2 38:13 It’s interesting. I have a client who, um, is a, I would refer to as the medium size, you know, roughly 50 employees, um, here in the Valley and they have a, um, a key person who works for them. And, and this key person oversees most all of the operations. I’m not out in the field, but internal operations and this person is with everything from the taxes to what the bylaws say to who’s employed and not. And this person approves all checks but has no check writing ability and refuses to have any and refuses to have even a key to the office. Refuses because she’s got so much power within the company. If something were to ever come up missing and there were, it would be, you know, an after hour situation. She doesn’t even have a key to the office.
Speaker 3 39:04 I love that. I mean that, that’s basically putting yourself to higher accountability depth. But that’s not the norm. That’s an exception to the rule. By the way. That’s not that. I don’t see that a lot.
Speaker 2 39:15 Something that you could put in practice. So that key person, like I said, she approved the checks, she goes through the invoices on accounts payable, but she does not sign anything.
Speaker 3 39:25 The good news, if you’re, you know, uh, to our listeners, there’s many ways to fix this. This is not, this should not kill your business. So anyway, you’re listening to business and legal talk with Leah and Claudia. We’re having fun talking about employee theft. Stay tuned. We’ll be right back.
Speaker 4 39:40 I was like, great day.
Speaker 3 40:16 We’re having so much fun. Come on, let’s bring this home. Employee theft would have thought just a boring topic could be so lively, but it is. And you know what? We’re here to protect you and why? Because we care. Right? Um, in there is the cool thing about what, what Claudine and I do is because we compliment each other. So you have accounting questions, you have growth questions, you have profit questions. I am the chief profit officer or green land advisors and please look us up www.greenlandhq.com or call our office a (559) 207-3148. You know what, I will talk to you, I will counsel you, I will help you. And um, you know, it may be, it’s a great fit. Maybe we can help you get it to the next level. We are growing businesses left and right throughout the state and we are profitable. We will help you be profitable and sustainable and grow and scale so you can have a profit exit strategy. So Claudine, so you know, yeah,
Speaker 2 41:13 we’ll see. We are a business in real estate, um, and now estate planning firm down in Turlock and we are moving up to Modesto. We’re actually opening another office in Modesto in the process of that. So we’re exciting. I know I’ve been kind of shouting that out a little bit recently. Um, and we are really excited. I want to just give a shout out to my associate who has been out on medical
Speaker 1 41:34 leave, who’s now returning. Um, give a shout out to Theresa Mason. She’s coming back. Yes, coming back. And Theresa is our house heading up our wills and trusts, um, sharing of our practice. So she is, um, offering a $500 discount for anybody who wants to establish a living trust and during the month of the end of may and throughout June. Um, Theresa’s fantastic. We’re so thrilled to have her back. Um, and she again will be heading up our estate planning, wills and trusts department. You can find us at www. sharon-law.com and that’s S H E R R O n-law.com (209) 427-2200. Awesome. So let’s bring this home. So employee theft, we talked about on the accounting side, uh, we talked about some stats we talked about on the legal side. Where do we go from here, Claudia? Well, I suppose the big question is how do we avoid this? Yeah, how do we avoid it?
Speaker 1 42:28 How do I hire that 10% that’ll never steal? Well, you know, that’s, that’s hard to say. You know what I’ve learned about probably I have personally hired over 500 people that prior to my professional career, whether directly or indirectly or my, um, within the different departments or subordinates of my, I have hired. And one thing I can tell you, there is no Bulletproof way to hire the perfect employee. You are going to have to go, you know, is higher, you know, you know, hire slow, fire fast. You know, that’s funny. I was, I w I was speaking with a client yesterday and we said the exact same thing, hire slow, fire fast, um, or something like that. Actually she, let me take that back. Her comment to me was I hire fast fire fast. Um, right now the market is such that the businesses are growing and that we need to put the boots on the ground as quickly as possible.
Speaker 1 43:29 Every employee comes to you with their best story when you have the interview. They’re not, that person is not going to sit there and tell you. Yeah, I’ve probably stolen a little bit too much from the last, you know, couple, two or three employers. You’re getting the best, best rendition of them in during the interview. It’s almost to the point of I’d rather just watch your actions. Yeah, I hear about it. So just come in and if you can get the job done, you’ll stick around. If not, you’re probably going to be out. True story. Alright. Big company hires an employee key position needed to juggle multiple calendars. An amazing interview. Blew everybody. I was even part of that interview. I was blown away. Right. But then I know better, right? I said check all the references, you know, cause you know, CFOs oversees the whole HR department so make sure though the risk is there or the, all the paperwork is up to snuff. The HR manager, everything checked out. This person was brilliant glow and recommendations and within three weeks we are ready to let her go. I know and you know what, especially at the top level positions it companies to have
Speaker 2 44:32 a tendency to spend sometimes months through the hiring process.
Speaker 3 44:36 So the moral of the story you just don’t know, right to use, you will never be fully ready to get that perfect person. So on average in my experience for every 10 people that you hire, one will be amazing. And the other nine would just D they will be talented but won’t be compliant or will be compliant but not talented. Oh, we’ll have talent and compliance. But there’ll be just Nash, you know, showing up to work, which is, you know, a character issues. And it’s really, so what I really look for is people with character. You can teach somebody in R and D in your field. Of course, you know, if you’re looking for an attorney, they have to have the attorney, they have to, you know, the degree they have to have gone. But put that aside, right aside from skills, character is, is is a big deal for me. I can teach you if I can teach somebody anything, you ha they have the character. But if you don’t have the character, I don’t care how much you know, because I won’t, I know you won’t.
Speaker 2 45:37 Right. And you can’t really teach character. I mean you can, you can inspire people. I know. Don’t think that it’s not something that you can say, okay, when you walk in the door, you’re going to be of certain character and you can be whatever character on the other side of that door. That’s just not how it works. It’s, it’s kind of your fabric.
Speaker 3 45:53 The PR people put the best foot forward in an interview and is honest. You have to expect it to be rehearsed. Uh, they know the questions. They done homework in your company. They probably, I mean, really good interview there. People had an excellent interviewees. Right? They’ll come ready, they’ll know everything about the founders. They’ll find everything on social media. Um, they’ll know. They almost feel like they already know you. Right, right. Because the one end
Speaker 2 46:16 and that, and that’s funny cause that’s why my client yesterday was saying, hi, I’m hiring fast and firing fast. That’s, that’s just how that is. And there was, this was probably the third person who had been terminated over the course of maybe six or eight weeks. And businesses is growing and they need people and you know, it’s, it’s at this point I just come to work. And if you get the job done, you’re going to stay.
Speaker 3 46:40 So business owners don’t want to obsess too much. You’re gonna, you’re bound to hire one or two bad people in your career. So just don’t obsess over it. You’ll get, but you gotta have the raw, you got to obey the HR loss. You gotta, you gotta, you gotta play with the rules within the state. You cannot legal there certain areas, you know, you can’t go out of without in pretty knowing what questions to ask in an interview process. And there’s, there’s a lot, there’s an minefield, right, Claudine or things that you can ask and get in trouble even before you even hire somebody. So don’t, don’t go at it alone. Get somebody to helps. I know that’s one of your areas of expertise, just helping people navigate the whole labor law. But um, but, but you never really know. So once you hire somebody in, assume that they have the character, they could have the skill set and they’re going to stick around. There are things you can do on your company
Speaker 1 47:30 to ensure that the time is not stolen from you. The money is not stolen from you. Right. And the secrets are not stolen from you. Right. And, and, and it doesn’t have to cost you a whole lot. I can tell you that if you would sit down, um, you know, and create the procedures and the policies, even if you create them in your own mind and just make a, a one page list of things and sit down with your employees, whether it’s one on one department by department or group by group. So if you have a group of people who are out in the field, they have a different set of circumstances than those that may be work in the office. But you really, really want to have this conversation. We call it a knees under the table conversation, meaning we’re all sitting under the table, we’re looking across the table at each other and we’re Ida I and we’re saying, yeah, we’re, this is, this is the message that I need you to understand.
Speaker 1 48:21 And that under no circumstances is this going to be okay. If you have a question, ask me. I’d rather you ask me if I can, if you can take a ream of paper home because your kid has a project and you’re out of paper and you’re running late to get home, I’d rather you just say, Hey, can I take a paper? Then I at least I have the choice of saying, you know what? No way that’s not gonna happen. Or like, Oh, sure, go ahead and take some paper. Um, and then then have the point. You just presume, but that is the knees under the table conversation. It doesn’t cost you anything. It may be a little bit uncomfortable, but it establishes the policies and it is, it puts everybody on the same page. And then that 80% who are likely, if the opportunity comes up to steel, then maybe you can have affected those people cause you’re going to have 10 apparently that or never going to steal.
Speaker 1 49:15 You’re going to have 10 that are always going to steal. And then you’ve got a big bucket of 80% who may or may not, who may or may not. And perhaps if you, if you do that and just have that, that serious IDI conversation, um, at least you perhaps could affect them and then they know that, that what your expectations are. Here’s a quick takeaway. Uh, if you have a small business and you have, you know, you should always have access to the bank accounts and never give any one of your employees the ability to do wires or money out of the company. So what I would do is I look at the daily transactions of your business. You should know what’s going on in and out of your business. It takes five minutes. You have the, you know, you have an app for your bank account and your phone look to see if something looks suspicious.
Speaker 1 49:53 Deal with it right then and there now you, you should never be surprised. Yeah, there is something that is go fishing. There’s a technique that somebody who has gotten the whole of your debit card or your credit card can test the waters by taking 90 cents a month, 70 cents, or even a penny out of your account and can do that several times to make sure you’re watching and not questioning it. And then pretty soon that becomes 30, 40, $50 a month. I’ve heard of situations in which business owners have thousands of dollars a year taking Oh, by just this, this debits, um, who may not even be connected to employees. Just that just, just theft out of your account. So just you gotta look, you gotta look at your bank account. Don’t completely rely on, don’t ever do bank balance accounting. I’ve said that in order than the other shows.
Speaker 1 50:43 You have to have bookkeeping, you have to do your books, you have to understand profit. You have to understand the loss or profit of your business. But you gotta look, you can be completely hands off your cash. And I would really highly recommend. So if I, uh, and I work with again, a lot of folks in the construction industry where, where they have jobs and they do what they should be doing, what’s called job costing. I think every business has a way to take expenses and allocate them to particular jobs. Or maybe it’s not jobs. Maybe it’s areas of your business. But you should be in, if you’re not doing it, your bookkeepers should be looking at your expenses and allocating them to either particular processes in your business or jobs. In our case, it’s clients. So if we spend X amount of dollars on filing fees, we on a monthly basis, my paralegal goes through all the charges to ensure that those have been charged appropriately to the client.
Speaker 1 51:43 Um, everybody should be doing it. And if you don’t have time, make sure your accountant comes up with some some scenario where they can take those expenses and allocate them because that is your trip wire. that’s where you see it and you go, wait a minute, what good stuff. This doesn’t have any place to go. Good stuff. So how have you figured out? We figured it all out? No, I want you, we want you to think about this as you go back to the office on Monday. How can you ensure that nothing is taken from you, that you should be profitable and sustainable and be able to keep all the money you make and don’t give an opportunity to somebody? Remember, 80% of people were not Downing. You know, we’re not down on people. We just said, Hey, given our human nature, give somebody the opportunity to do something, they will. Don’t let that happen to you. So you have been listening to business and legal talk with Leah and Claudina. I hope this was helpful to you. Was this a good topic? It was a great topic for me is a great topic. So I wish we wishing everyone a great weekend. Um, stay real and we’ll talk to you next week.