By: Ruth King
What do you do if a family member steals from the company?
Most business owners don’t think twice about letting a spouse, another family member, or even a trusted employee have check signing authority on the business bank accounts.
A sad, but true story:
Three siblings own and operate a company. Each sibling has his/her area of expertise and is good in that area. They make joint decisions about the direction of the company. Each trusts the other two siblings to do their job well. They all have check signing authority on the company bank accounts.
One of the siblings, who was responsible for the financial side of the company, got hooked on drugs. The other two siblings knew this sibling had a drug problem. But, they had been promised by this sibling that she had “kicked the habit.” Unfortunately, this wasn’t true.
This sibling slowly started taking money out of the business checking account to fund the drug habit. It wasn’t caught by the other two siblings until they started having cash flow problems.
What would you do?
Your husband, wife, or other relative, or long time trusted employee is siphoning money to fund a drug habit. And, what’s worse, that person may own a part of the company!
First, immediately take that person’s check signing privileges away. This means going to the bank and signing new signature cards. No more money gets siphoned out of the company.
Second, remove check temptation from that person. Put them in another location, under lock and key, unless they are being used. In this case, they had to remove her from the financial side of the business and insisted that she went to a rehabilitation facility.
Third, tell that person that he/she no longer has check signing authority and the signature cards have been changed.
Fourth, the other siblings must be more involved in the financial side of the business. They also have to keep an eye on cash. This would have been caught more quickly before the cash flow problems began. In this case they had to hire a bookkeeper.
Company ownership is a sticky situation. Hopefully you have a contingency plan in place for what happens when an owner gets divorced (can be very nasty), dies, is disabled, has an illness, or is doing illegal activities, and more.
Assuming that you have an agreement in place, enforce the agreement. I promise you it’s not fun, especially with a family member that you love. However, it must be done for the long term survival of the company.
And, always keep an eye on cash – even if a trusted sibling has the day to day financial responsibility.
Ruth King is known globally as the “Profitability Master,” and is a a thought leader in entrepreneurship and business. Her books have been recognized as among the greatest in numerous industries. Learn more about all her business activities here.