What should you do if you suspect your small business’s CFO is stealing from your company? Join hosts Elizabeth Larkin and Gene Marks as they discuss how to tackle this tricky situation in this week’s episode of the Small Biz Ahead Podcast.

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Elizabeth: Welcome back to another episode of the Small Biz Ahead Podcast. We’re already laughing because we were just talking about sharks.

Gene: No. Let’s talk about this issue, Elizabeth. Let me ask you a question, Elizabeth. You have a, not an employee, but a contractor that works for you that’s doing work for you that you rely on during the week for your business. Let’s say it’s marketing work, right, that they’re doing. They’ve got responsibilities or whatever.

Let’s say that the contractor sends you an email on a Friday that on Saturday the contractor has to put their cat down, right. It’s very sad and so they “I won’t be able to come to work. I won’t be able to fulfill their services starting till the following Tuesday.” Right.

They’re going to miss a day’s worth of services because they’re putting their cat down. What’s your response to that?

Elizabeth: I would feel bad for the situation with the cat, but if they’re a contractor I don’t feel like I need that detail. They could just tell me, “I’m”- First of all, contractors, you’re not allowed to tell them when they can work, right?

Gene: No, not at all. In this case, let’s just say the hypothetical business owner, let’s say his name is, I don’t know.

Elizabeth: Sheen.

Gene: Sheen. Let’s say Sheen, who has a hypothetical business near say, oh, I don’t know, in the Pennsylvania area, that gets an email from a contractor …

Elizabeth: They happen to sell CRM …

Gene: Yeah, let’s just say that this person does and relies on this person to do certain tasks and contracted to do that and is unable to do that because they had to put their cat to sleep on a Saturday. They’re going to be unavailable until Tuesday to do the services that’s been contracted.

Elizabeth: Since they’re not an employee they can’t take advantage of your bereavement benefits.

Gene: Not an employee. Right. They can’t take advantage of the extensive and generous Marks Group bereavement.

Elizabeth: Pet bereavement.

Gene: Pet bereavement policy. How do you respond to that?

Elizabeth: Well, you know we love our dogs. We talk about our dogs all the time. You also have a cat, which I didn’t even know.

Gene: I do. Cat and a dog, yep.

Elizabeth: I found that out last episode or two episodes ago. Like I was saying, I’ve had a dog die on a weekend. I did go to work on Monday but I was an employee.

Gene: You had an obligation.

Elizabeth: I did cry in the bathroom in the office, but I feel like if I’m a contractor I just do the work because I’m not really a part of the family.

Gene: No. Right.

Elizabeth: They’re paying me for my time they’re not …

Gene: Yeah, it’s your business. I pay this woman, okay, everybody this is me. She sends me an invoice. I pay her for her services that she’s done as a- She’s got her own business. She has other clients or whatever. This is contracted to do. You’re in business so you’re a service provider. Nobody wants to hear about what’s going on. We’re expecting you to get your work done.

I would almost prefer not to even know. I would have almost preferred for her to send me an email that day, Monday, and say, “Oh, Gene. Something personal came up. I’m very sorry. I just can’t do what I got to do today, but I’ll be back in action tomorrow.”

Too much information. I found out the reason why she can’t come in on a Monday is because she’s putting her cat down on Saturday. Although, that’s very sad and all of that, we have responsibilities.

Elizabeth: Yeah, I mean, if you think about her being a business owner. You wouldn’t say to one of your clients, “I had to put my dog down.”

Gene: Thank you. Yeah, so I can’t make it in to do the training that I’ve been contracted to do on Monday because I had to put my dog down on Saturday. What would a client be like. What are you talking about? We contracted you to come out and do training.

Elizabeth: If you really couldn’t make it. Let’s say you had to travel on Saturday to get there on Monday or something, then you just say, “I had a personal issue come up and I can’t make it.”

Gene: That’s right.

Elizabeth: I think people feel like they want to share. They want to give a lot of personal information. I have a friend who made a mistake at work. It wasn’t a big deal, it was just a mistake, and ended up telling her boss that she had just been diagnosed with depression. I’m like, “You don’t need to give that detail.”

Gene: You don’t need to know that. Too much information.

Elizabeth: First of all, that is not the other person’s business. You don’t want to hear that from one of your employees.

Gene: Bottom line is this, is that, I mean, this is sort of a word of advice to employees, but this is a show about small business owners. Small business owners we’re freelancers, we’re entrepreneurs, we’re solopreneurs. We’re doing service for clients.

If you can’t fulfill your responsibility because something came up in your life, and we all have stuff that comes up, your client, your customer, they don’t want to know about that. They don’t care. They don’t want to know that you have been diagnosed with depression or that your cat had to be put down.

The bottom line is you’re not doing what you have been contracted to do so you’ve got to man up and say, “Okay, if I’m unable to do it.” Apologize for not doing it. You got to make it up, as well.

Elizabeth: Now, what would happen, let’s say this was one of your employees. I know I always use the excuse of Cory, but let’s say this was Cory.

Gene: Right. I mean, again, if it’s an employee and that employee wants to take time off then you’ve got paid time off policies.

Elizabeth: Yeah. Do you care though why he’s taking the time off?

Gene: No, not at all. It’s the same thing. I’m like, “Dude, if you’re entitled to your paid time off and you’ve got a day, go ahead and take the time. I don’t really care if you’re going out to go water skiing all day or whatever. Fine.” We don’t need to know that. It’s just too much detail.

Frankly, it can work against you. Now, because this woman shared that detail with me why she’s missing an obligated service to perform. That was too much information. I would rather not know because now I’m like, “Really? This is the kind of person I hired? She’s missing work two days later after putting her cat down.”

Elizabeth: Do you think she possibly doesn’t see herself as a business owner?

Gene: That is a really good question and it could very well be that’s the situation. That’s a problem in itself because she is. Again, how many people listening to us right now are independent contractors themselves?

Elizabeth: That don’t think of themselves.

Gene: They are.

Elizabeth: We actually have an article coming out about this is. It’s “Micropreneur, Solopreneur, Entrepreneur, Small Business Owner: Which One Are You?” The thing is, you’re probably, I mean, if you’re a micropreneur or solopreneur that means you’re one person. Everyone listening, falls into one of those categories, but you’re all small business owners.

Gene: Dude, if you file a Schedule C on your tax return or you are an S Corporation. Even if you just file a Schedule C …

Elizabeth: Or if you have clients.

Gene: Or if you have other outside income. Yeah, you are a business owner and you have a responsibility to us. You’re not an employee of theirs. You’re an owner. It’s your business and you’ve got to take it seriously.

Elizabeth: Yes.

Gene: There. I’ve gotten it off my chest. Alright, we’re done for the day. Is there a bottle around here somewhere?

Elizabeth: Now we can start. Okay, we’re going to be back with question number one. This is another question about an employee stealing from you, but it has a twist.

QUESTION #1: CFO is Stealing

Elizabeth: Okay, we’re back. This is question one. This is from Harper from Blacksburg, Virginia. Harper writes,

“I’m worried that my CFO may be stealing from the company. Is there a way for me to investigate this without raising a red flag? If he is stealing, I don’t want to tip him off and if he’s not, I don’t want to offend him. P.S. he’s a contractor that I hired via my accounting firm.”

So, Gene, we’ve answered a lot of questions about catching employees stealing from the company. I think we did one about they’re stealing post-it notes, is it going to escalate?

Gene: Right.

Elizabeth: We’ve advised people that everyone needs to take a week off. That’s the best way to figure out if an employee is stealing. This has a twist because this is actually a vendor. This is a contractor hired via the accounting firm.

Gene: Right.

Elizabeth: I’m going to assume that this business, Harper’s business, is very intertwined with this accounting firm because that firm probably does their taxes and he hired, or actually, I don’t know if Harper is a he or she, let’s say she, and she hired a CFO via this firm. That’s a little different than catching a regular employee. You can’t tell this contractor, “Go out on vacation.”

Gene Marks: Right. I’m assuming Harper, this is Harper’s business so it’s the CFO that he, I’m assuming Harper is a-

Elizabeth: She.

Gene: Do you think it’s a she? Okay, so she hired this person.

For starters, here’s my thing. Business is all about trust and credibility. My God, your CFO. I mean, there’s one thing. If you have doubts about the credibility of your salesperson, your sales manager, that’s one thing, but your CFO.

Elizabeth: Who’s a contractor.

Gene: Who is a contractor, but whatever. If you have doubts about that person’s honesty or credibility or whatever, anything, because I’m a big believer in where there’s smoke there’s fire, you got to confront that issue straight off the bat. You got to be prepared to cut that guy loose.

Elizabeth: I’m assuming that Harper would then go to that accounting firm and say, “These are my concerns. How do we work this out?”

Gene: Yep.

Elizabeth: So you’re not going directly to the CFO.

Gene: No, actually, I mean, if it was me and I had that- By the way, everybody’s personality is that much different, I would actually have a meeting with the CFO and somebody from the accounting firm at the same time. The three of us. What I would do is I would try and keep it as light and non-confrontational as possible.

Elizabeth: Yeah, because she’s saying she doesn’t actually have evidence. She just has a suspicion.

Gene: Right. She’s got to say, she’s got to bring up certain circumstances or examples where she’s questioning how this was accounted for and where it went. She’s got both parties in the room there because it’s your accounting firm and the CFO and it’s an accounting question so she wants to include them both. I think she needs to ask those questions, get the answers, see how reasonable the answers are.

If the answer from the CFO does not pass her sniff test, then she has to have another meeting with the accounting firm and say, “Did that? When the guy, when he answered his question, was that making sense to you? Do you have the same concerns as me?”

Elizabeth: Yeah.

Gene: Maybe she’s out in left field and the accounting firm is like, “No. He’s fine.”

Elizabeth: Yeah.

Gene: Hopefully if the accounting firm, you have a good relationship with them and they’re a good firm, they will also notice that same issue.

Elizabeth: Now, one thing that you wrote about recently and we’ve talked about before is so this is your accounting firm so you’re dealing with them on taxes, so more than just finances. Taxes, you pay so much money in taxes. For new small business owners, they’re often really surprised with how much they’re paying in taxes.

Gene: Yeah.

Elizabeth: If that’s the case, it might just be as simple as that.

Gene: Sure.

Elizabeth: She’s paying more in taxes than she thought she would. She’s wondering if the guy is kind of taking a little off the top and then that’s an easy fix.

Gene: You know what I can’t- This goes a little bit beyond that, but there’s one trait in people, this is all people, this is not just in business, Elizabeth, that really rubs me the wrong way is when people attack or they assume and they’re very defensive.

I’ve learned in my life that when I think that there’s something that I don’t understand, 99% of the time it’s because I’m ignorant. There’s something I’m missing. There’s something I didn’t realize so before I start firing away with both cannons, at like, “Oh, there’s something wrong going on there or whatever.”

I have learned to just say, “Can you educate me and explain to me why?” You go with the assumption that you’re the one that really doesn’t know all the facts. You need to learn from it so you learn that with the taxes.

Elizabeth: Now, if he was stealing and she had that meeting, he would probably stop right away because he’d know that she was onto her or to him.

Gene: Who knows? I mean, then we’re getting beyond what sort of reactions. I mean, if you really think that, and it could be validated by another party like the accounting firm saying, “Yeah, you know what, this doesn’t seem right. I think it could be.” You got to take up immediate action and remove that guy. There shouldn’t be any more taking of chances. The person is removed. There’s plenty of CFOs out there to come and do the work.

Elizabeth: Yeah. You want to go in with a lot of curiosity and see what happens from there.

Gene: Yeah. You want to just position it, again, you’re not accusing, you’re not firing away. It’s more like, “Please teach me. I’m just not sure what’s going on here.”

Elizabeth: Okay. Sounds good. Alright, we’ll be right back with question number two. This is about inheriting a family business and dealing with cranky customers.

QUESTION #2: Dealing with Difficult Customers

Elizabeth: Okay, we’re back with question number two. This is from Arlo in Kansas. The question is:

“My father was a small business owner. He believed that the customer is always right. Now that I’m running his hardware store, how do I honor his approach even when dealing with customers who are clearly wrong?”

This is one of our favorite topics recently, customer service. Gene wrote a very controversial article on dealing with customers that I will link in the show notes here. How do you do that? I mean, you really do have to go with the approach that the customer is always right, but there is a line.

Gene: Yeah, there definitely is a line. It depends on the nature of the business that you’re in. If you are in the hospitality business, for example, or the restaurant business, the customer is always right. That just goes without saying. If you’re running a bed and breakfast and some customer complains, I mean, it’s just that industry is one where the customer is just always right. You just have to sort of suck it up, right?

Elizabeth: Yeah.

Gene: If you’re in a service business like mine, I’m in the IT business, the customer is not always right. I’ve gotten into shouting matches with clients before because they will complain or they will say stuff that they just don’t know. They’re not educated in the topic and they’ve hired me as their service provider, my firm.

Elizabeth: You’re the expert.

Gene: I’m the expert, right. When it’s getting through and somebody’s complaining, “Well, it’s taken more time than it should and we’re not getting whatever.” At this point, we’ve been on enough projects with enough smart people to know what the facts are. When somebody comes in, they don’t have all those facts and they’re yelling and screaming about it, the customer is not always right.

I truly believe if you are a really good service provider, if you’re an attorney, if you’re an accountant, if you’re an IT person, if you’re an insurance agent, you should be prepared to stand up and go eye to eyeball with a customer and be prepared to fight them.

In the end, you’re looking after their best interests. They might think they’re right, but you know better for them and you have to have the self confidence to do that.

Elizabeth: What about in a retail shop though?

Gene Marks: Right. Yeah, I was getting to that. Here, you’re in a hardware store and you’ve got the customer, is the customer always right? The bottom line is that this guy is running, he’s a merchant, so much is word of mouth. So much is social media and Yelp and consumer reviews and all of that.

You’re going to have an allowance for certain losses from jerky customers. You’re just going to do it. If you get into a shouting match with a customer or you confront customers, the world is going to know about that in today’s social media world.

All you can do is cut your losses as quickly as possible. There is a percentage that is going to come into that hardware store, a small percentage I hope, that are just going to be lunatics. You know that.

If you know that already and then you get that lunatic and the person is arguing because they bought this hammer and the hammer didn’t do it even though it’s supposed to do it or whatever, you have to have an allowance for your business and say, “You know what. Let me refund you the money for the hammer. Very sorry and thank you very much.” Keep it cool. Keep it polite and professional and cut your losses and try to get them out of there.

Elizabeth: How is there that much to complain about in a hardware store?

Gene: Well, I mean, people find anything to complain about, believe me. That’s human nature. I just think that you’re going to have to, I don’t think you have to bend over backwards to try and accommodate the person, I just think your goal is to just …

Elizabeth: Get them out of the store as quickly as possible.

Gene: Get them out of the store as quickly as possible. Appease them. Here’s your 20 bucks back, very sorry, feel free to come back.

Elizabeth: Now, would you budget for that in your annual?

Gene: Every business, I learned this at an early age, every business has their allowances.

Elizabeth: Okay.

Gene: Every business there’s a returns and allowances, re-allowance. There’s a doubtful accounts allowance. There’s an inventory obsolescence allowance.

Elizabeth: What is doubtful accounts?

Gene: Doubtful accounts is receivables that you don’t collect.

Elizabeth: Okay.

Gene Marks: Every business has this. If you do $100 worth of billing during the course of a month, on average one to two percent of that, depending on your industry, it’s just not going to be collected. That’s just the way the numbers work across the board of most businesses.

If you’re in the retail store and the hardware business, there is a percentage in the hardware retail store industry of customer returns. It’s some number. It’s one percent or three percent or whatever. You’ve got to build that into your cost structure. Make sure that it’s in your pricing so you can be …

Elizabeth: To be safe, you want to build in three percent.

Gene: Yeah, well, I don’t want to give a specific number because it depends on the business and the industry. What I would recommend though, again, for Arlo is talk to your professional organization that represents hardware stores. Ask and find out what is a normal returns and allowance percentage to expect?

That’s what you want to build into your budget, into your cost structure, so that when that guy comes in complaining, whatever reason, about the hammer, you return him the money and it’s built in to your cost structure.

Elizabeth: Great. Alright, we’ll be right back with Gene’s Word of Brilliance.


Elizabeth: We’re back. Gene, what is your Word of Brilliance for us?

Gene: Today, you’ll like this story, Elizabeth, I wrote about this in the Washington Post recently. My Word of Brilliance is Tesco. Do you know what Tesco is?

Elizabeth: It sounds like a British gas station.

Gene: Close. I’m pretty impressed. It’s a British supermarket chain, grocery store, supermarket. Everybody in Britain knows Tesco’s. They’ve been around for ages.

Anyway, there’s one Tesco store in England and I apologize, you can look it up in the Washington Post because I wrote about it. They might have been in Scotland, but they’re in the general UK islands. They started to do something really interesting that I think a lot of business owners should also give some consideration to.

They started a new checkout line, which they called the “chilled out checkout line.” What they do is for any of their customers that need a little bit of extra time, particularly those customers that might be suffering from Alzheimer’s, from later forms of dementia, people that might have any kind of mental challenges even mothers that might come into the store.

Elizabeth: Have a lot of kids.

Gene: With a lot of kids. You just need a few extra minutes at checkout to count your money, to be explained the transaction without somebody behind you tapping their foot and complaining and whatever.

Elizabeth: That’s a great idea.

Gene: They started and it’s been hugely popular. It’s a great idea, and so because of that they have been accommodating customers that have these, I don’t know if you want to call it afflictions or diseases, these things in their life, these challenges.

Elizabeth: Challenges.

Gene: Challenges in their lives. They’ve been actually going out of their way to go to that Tesco store so they can do their shopping and know that it’s just one additional stress in their life that they don’t have to deal with. It’s created more business for them.

Elizabeth: I can’t imagine going through life with a disability or something. Say you’re blind, you have a seeing eye dog, yeah, grocery shopping is going to be a challenge.

Gene: Grocery shopping, I mean, I think to myself, there’s a Target store near where I live. They have the self-checkout and then they have also aided checkout. There’s always a line to check out.

It’s in town, it’s in Philly, so there’s a lot of action, a lot of rush or whatever. Even me, who for the moment, have command of my mental resource, I’m getting ready for the checkout. You know what I mean?

When that checkout thing opens I got to run there and do it. You want to make sure that you get through the transaction fast enough. You don’t want to be holding people up. It’s a little stressful. God, I can’t even imagine what it’s like for somebody that has a challenge, a mental challenge, or little kids.

Here’s a merchant, here’s a store that’s responding to that need. I think if you run your stores well and you might have in your community customers that you think it might attract more customers, I think it’s a wonderful thing to do.

Elizabeth: I love that. I feel like most businesses are trying to innovate for the people that take the least amount of their time. Here’s a business who’s trying to innovate for the people that take more of their time.

Gene: They’re attracting more business because of it.

Elizabeth: Yeah.

Gene: Cool.

Elizabeth: Great. Alright, great episode Gene. We’ll talk to you next week.

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