Solomon Bruce Consulting Blog

Thursday, January 21, 2016

“There Are Times When You Do Spook the Herd!”

        A phrase that I use frequently with  career counselling clients entering a new role at a new company is “Don’t Spook the Herd.”  This aphorism helps new employees understand the value of a cultural fit in their new job and learn how to get along with their colleagues in the early stages of their assignment.

         However, there are very clearly times when it’s best to go from don’t to do, when one does need to “Spook the Herd.” A key criterion of that need is when money is involved. 

          The December, 2015, edition of Texas Monthly tells the story of an accountant at Collin Street Bakery in Corsicana, Texas, and the approximately $18 million that he embezzled.  Sadly, this story is not unique.  Just last week, the Wyoming Fiddlers Association fired their long time secretary for embezzling approximately $10,000 from the organization.  A major automobile dealer former client of ours welcomed a new chief financial officer who immediately discovered that a long-time employee had absconded with nearly $250,000 from the dealership.  A newly-hired church business manager identified a veteran church staff member lifting their own personal offerings from the collection plate each week.  The alleged embezzlers may try to justify their actions as inspired by low pay, jealousy of senior company/organizational officials or having an addiction problem, be it drugs, gambling or some other problem. Does it matter?

            They were part of the herd. In each instance, the president or chief executive officers of the organizations missed what was going on until someone (new) saw the problem and spoke up. The long-time, trusted employee might never be suspected as  involved in such activity.  And that tenured employee frequently the one with institutional knowledge about  financial or accounting questions, the go-to oracle when info is sought.

            Because of the entrenched situation of a perpetrator, many businesses or organizations elect not to prosecute the individual involved, ostensibly for fear of bad publicity or negative public reaction. At the core might be disbelief and dismay at having been had. But as bad the emotions and residuals might feel, , stealing is stealing.  There is no equivocation.

            So when someone through naiveté or with fresh eyes or having the courage to spook the herd and speak up, we are reminded of the importance of paying very close attention and eschewing complacency – always. Keep in mind what you’ll need to do to find out  if your business has such a problem. Know, too, that many most businesses have similar concerns.  Here are two initial steps:
  • Conduct an external audit of company finances.  Yes, this costs money, but having an external audit will identify if your accounting procedures are in accordance with generally accepted accounting principles.  Many accounting firms that conduct audits will qualify the audit results and state that fraud detection is not part of the audit. Nevertheless,  if found, you will have a problem exposed.
  • Have an uninterested third party, a business consultant or other advisory firm, come in and ask questions of the financial staff.  We like the “Why” question best, when asking about process.
    The “Why” question engenders a series of follow on questions, each digging deeper into the issue.  This technique, used extensively in industrial quality control applications, continues to explore “Why” something happens.  Normally, if there is a financial accounting problem, this technique will identify the issue.  Yes, it’s a tad tedious and burdensome to accomplish. However the end result is either everything is in order and no further inquiry is necessary or a problem has been identified, one that requires further exploration and resolution.
    Openly investigating the finances of any company or organization will always “Spook the Herd.”  And that’s a good thing.  If there are no problems, you can rest assured that your financial systems are in order.  If problems are detected, you can take action to resolve deficiencies in a timely manner.
    Our experience in matters such as these is that people rarely enjoy having their integrity or veracity questioned.  Everyone needs to know that the questions are inquiries only, not accusations or comments impugning an individual’s integrity. All reliable team members should move positively in the same direction toward  ensuring that internal accounting control procedures are working as designed. 
    Why wait for a new hire to shake things up? Why not take a look at all of your accounting and bookkeeping procedures now.  Make sure that you understand what is going on. Know why you use your systems as you do, why you are taking certain actions and the reasoning behind the methodology employed.  Remember, it is YOUR money that is involved.  Don’t be afraid to make the hard decisions.  A little disruption can be valuable, especially the review yields  improper actions.  Better to spook the herd than watch hard-earned revenues disappear through illegal actions you might be able to prevent.


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