Kitchen & Bath Design News is the industry's leading business, design and product resource for the kitchen and bath trade.
Issue link: http://kitchenbathdesign.epubxp.com/i/493213
20 | Kitchen & Bath Design News | April 2015 Business Management { #ruce ,elleran $,% $P" } I f you are an optimistic, positive person (which most business owners are or we wouldn't be in business for ourselves in the frst place), then you prob- ably tend to assume that the people you come into contact with largely share your own values and beliefs. As kitchen and bath firm owners, we also like to think that we are pretty good judges of char- acter and that we can make good hiring decisions. Trusting is great, but it's also a good idea to employ some common sense protec- tions. So when it comes to the risks involved within small businesses, it's okay to go with our "gut," but it's equally im- portant to make sure that we take other measures to protect our assets and reputations. Over the years, as our companies have grown and we hired people to help us conduct our business, admin- istrative tasks have tended to be the frst ones delegated to others. There is a natural ten- dency for us to assume that the people we hire are honest and trustworthy; sadly, this is not always the case. This month, we will look at some of the best ways to protect our kitchen and bath frms from the temptations and tendencies that may be present in those we hire. HIRING PRACTICES It's important to establish a set of procedures to be fol- lowed with all of our stafng and hiring decisions. Some of the elements that should go into this process are: » » Have every potential employee complete an ap- plication form, in their own handwriting. The form should ask for all relevant information about the employee. » » Have the potential employ- ee return for two or three follow-up interviews with both yourself and some of your other staf members, preferably including one with whom the new em- ployee will work directly. » » Ask the tough questions, even though the wrong answer will be obvious and a less than truthful answer may be expected regardless of the facts. Such questions might include: "Have you ever had any trouble with the law?" "Have you had any problems with drugs or al- cohol?" "Is there anything we should know about you that we haven't asked?" » » Check references care- fully, including personal references and former em- ployers. You will fnd many former employers are re - luctant to discuss any problems that they may have had with an employee for fear of legal repercus- sions. In this case, you can get a telling response by asking the question: "Is this person eligible to be rehired?" » » Particularly if the potential employee will be handling cash or bank accounts, you should look carefully at the person's fnancial situation, i.e. bankruptcies, etc. » » Finally, there are services that can be used to per- form background checks on individuals, and uti- lizing these should be considered to get a more comprehensive picture. CRITICAL PROCEDURES Once your business has reached a point where you are adding staf, particularly for administrative positions, it's important to institute a set of procedures that will protect your assets. You'll want to start by establishing these critical procedures. » » Division of responsibilities » › Every attempt should be made to set up pro- cedures where it would require two people col- luding to remove assets inappropriately from the business. For instance, the person who recon- ciles the bank account should not be the same one who prepares and signs checks. » › All checks made out to the company should be stamped with a "restric- tive endorsement," which requires deposit only to the company's bank ac- count as soon as they are received. » › The person processing in- voices from suppliers for payment should not have authority to place orders with the supplier. » » Take care of the authority to make purchases on the company's behalf » › While it is convenient to provide employees with credit cards for gas pur- chases and materials at the local box store, such cards are an opportunity for abuse. Have employ- ees turn in all receipts for such purchases to your accounting department and have them matched to the bills from these companies. » › Make sure you are clear with all employees who have such credit privileg- es what things are and are not approved purchases. For instance, is it okay to charge a new saw to the company? How about saw blades or nails? Likewise, is it okay to charge gas if the vehicle is being used for personal use? » › If the company provides cell phones for employ- ees, make sure that you have a policy in place for what appropriate uses of phones are. Again, some- one other than one of the users should be reviewing the phone bills to watch for excessive use and un- authorized calls. » » Time is money » › If you are paying em- ployees by the hour, particularly if they are working in the feld with- out supervision, you'll need to set up proce- dures to make sure that your company is getting eight hours work for eight hours pay. Padding time cards is a common prob- lem for small construction companies. TRUST CAN'T BE BLIND It is great to be trusting, but there are some common sense things that should be done to make sure you lower the risk of potential problems. The frst of these is to real- ize that fraud can happen to you. Most fraud actually oc- curs in small businesses that lack the sophistication of con- trol procedures and ability to separate functions the way larger businesses can. » » Remember that most em- bezzlements occur over a long period of time with a constant stream of small amounts of money leaving the business. Over time, this can easily turn into several thousand dollars. » » Be careful of placing people with significant financial problems in positions where such fraud can occur. Otherwise honest people can be pushed over the edge by such fnancial pres- sures. It is prudent to run credit checks on potential hires who will be working in sensitive positions. » » Make sure that all em- ployees with any kind of financial or purchasing responsibility take their annual vacations. Be leery of the "dedicated" employee who never takes a day of. » » Be particularly vigilant if your business is facing downsizing with layofs on the horizon. Most of us will go through our entire business careers without having to deal with a major fraud, but almost all of us will have to deal with at least some episode of employ- ee dishonesty. Establishing sound internal control pro - cedures before this happens is the best means to prevent having to deal with this on a regular basis. Tips for Preventing Fraud at Your Firm Establishing sound internal control procedures can help to prevent fraud in your business. Read past columns and features and send us your comments about this article and others by logging onto our Web site: www.ForResidentialPros.com l5his month we will looL at some of the best ways to protect our Litchen and bath prms from the temptations and potentially harmful tendencies that may be present in those we hire.z