How to Prevent Your Business From Becoming a Victim of Fraud

As a small-business owner, you have a lot on your plate. Keeping an eye on everything that’s going on in your office is not possible nor is it a smart use of your time.

When your designing your business structures, you want to make sure you’re hoping for the best from your employees, managers and business partners – but planning for the worst.

The statistics in a recent Entreprenuer Magazine article should send a big jolt of fear into small business owners. According to a 2016 embezzlement survey by HISCOX, a specialty insurance company, 80 percent of embezzlements occurred at small businesses — defined as those with less than 150 employees — and 30 percent of embezzlements involved a loss of more than $500,000.

One major reason scammers target small businesses is because they often lack checks and balances. Typically, a company starts out with employees who are family and friends, and everyone has access to sensitive client information, inventory and sometimes even the checkbook. You may say, that won’t happen at my company — they all love working here — but it does. In fact, 30 percent of the embezzlements occurred because there were no checks and balances at all.

Checks and Balances

Make sure your business has a system of checks and balances to protect your cash, assets, and overall business and to keep operations running smoothly.

The Purpose Of Checks And Balances

So what role should checks and balances play within your organization? Think of them as a series of simple security measures meant to shield you against fraud and other forms of financial malfeasance.

What are the Most Common Forms of Fraud?

  • Check Tampering
  • Skimming
  • Billing Fraud
  • Reimbursement of Expenses
  • Cash Larceny
  • Payroll Fraud
  • Inventory/Merchandise Fraud

Preventing Fraud

From Dun & Bradstreet, there are things you can do to help guard against small business fraud.  Here are seven suggestions for how to prevent the most common forms of fraud.

Check Tampering

Forging, altering, or stealing a check from a company bank account is known as check tampering. The best ways to help protect against this common type of fraud include keeping the company’s checkbooks locked away, regularly taking account of all checks – including voided payments – and reviewing bank statements as they’re delivered. The perpetrator may keep their withdrawals relatively small to try and avoid detection, so it’s important that you have an up-to-date picture of your bank accounts.

Skimming

Skimming occurs when money is taken from a business before it’s recorded. In its simplest form, an employee might pocket cash at the register without ringing up a sale. If this is the case, even balancing your receipts with total cash for the day won’t reveal the theft. Check your inventory on a regular basis. If items are missing and can’t be accounted for on receipts, someone may be skimming.

Billing Fraud

In one scenario, an employee with bad intentions sets up a shell company, then bills his employer for fictitious goods or services. Billing fraud also occurs when an employee submits an invoice to the company for personal purchases. Either way, the business owner has been duped by a disingenuous employee.

This type of fraud is best prevented by requiring your signature and approval for all business expenses, regularly reviewing the company’s list of vendors, and having different people responsible for invoicing and issuing payments. These protections can make it more difficult for someone to sneak in improper bills.

Reimbursement of Expenses

Many companies reimburse employees for legitimate business expenses, such as mileage or hotel bills. This is only fair. Unfortunately, employees who submit fake receipts or try to get funds to cover personal purchases take advantage of the system. You should require receipts for all reimbursements, along with a stated business justification. Something as simple as “Entertaining client A” should suffice.

The company should also require the business owner or finance head to sign-off on these expenses. Keep an eye out for suspicious spending patterns, like unusually large requests from the same employee month after month.

Cash Larceny

Cash larceny typically involves theft of cash from the company after it has been recorded in the books, but before the funds can be deposited. Albeit on a smaller scale, theft from the company’s petty cash pool is also a common occurrence.

The best way to protect against cash larceny is to stamp all incoming checks “for deposit only” with the name of your company. In addition, cash deposits should only be made by the company’s owner to ensure all funds make it to the bank. Balance your cash register receipts at the end of each business day to make sure payments are accounted for.

Payroll Fraud

In this scenario, the employee causes the employer to issue a payment for false compensation claims, such as phony overtime or paychecks for people not on the company payroll.

The size of your business can affect measures you take to prevent payroll fraud. If you only employ a handful of people, you may be able to monitor their hours simply by paying a little extra attention during the day. This isn’t feasible if you employ dozens of staffers. Instead, you can require employee signatures on all time cards and make them come into the office to claim physical checks. That way you should be able to spot people on the payroll who don’t belong. You might also offer direct deposit, which is convenient for employees and ensures paychecks are going to the right people.

Non-Cash Fraud

While cash is king, many criminals are happy to steal merchandise or inventory. Known as non-cash fraud, it can be equally costly to a business.

The most effective way to avoid non-cash fraud is to initiate very tight inventory controls. Tactics can include making periodic inventory counts, installing surveillance cameras, and increasing the presence of physical security.

Taking fraud lightly is exactly what the individuals hacking into your system now are hoping for. Eventually it may come knocking at your door. Hopefully when it does, you’ll be prepared.

 

How to Compete with the Online Sale of Hearing Aids

Many people have engaged in the online shopping versus brick and mortar shopping debate. Both brick and mortar stores and online merchants have certain pros and cons that differ based upon the types of products offered and the specific needs of the individual shopper.

If you are not planning to sell hearing aids online, how can you compete with companies that do?

5 Advantages of a Brick and Mortar Store

  1. A core benefit is the most obvious one, the ability to touch and see objects in person. Online stores can provide the consumer with pictures and videos, but actually holding the product can provide some tactile impressions that simply cannot be matched online. Particularly when it comes to the sale of hearing aids. The ‘in-store” experience simply cannot be matched online.
  2. Instant gratification, the ability to buy an item and bring it home immediately. Not every hearing aid can be sold and brought home immediately but the option for many patients does exist.
  3. The ability to support local merchants. Don’t underestimate how strongly some of your patients feel about supporting their local economy. Your demographic is keenly aware of the interconnectivity of their financial well being to the financial well being of those around them. Even the younger demographic has slowly but surely begun to embrace the concept of “buy locally” with everything from food to clothing to home goods and so on.
  4. Your customer can speak directly to an expert about their purchase (in case there is any doubt that means you). You can provide information about the products and more importantly answer questions about the products that are bound to arise. Online stores provide answers to frequently asked questions but that’s of no use to a patient if their question isn’t listed.
  5. You can provide service that is simply unavailable to online shoppers.
    • Walk in service hours
    • Include batteries with the sale and mail the batteries to the patient’s home.
    • Keep an ample supply of loaners, always welcome if your patient will be attending a once in a lifetime event days after his hearing aids need to be sent out for repair.

The most important thing to remember about service is that no two people will define service in exactly the same way. Ask questions and teach your staff to ask questions. Find out from your customers what you could do to provide a better experience and then do it.

Your demographic is concerned about their health, they have a hefty amount of discretionary income and they will be more than happy to spend it on your services if you give them plenty of reasons to.

How I Bought a Chandelier

And yes this has everything to do with buying and selling  hearing aids.

Times have changed. Consumers are buying en masse online and retail is feeling the effect. Read more in The Atlantic about the “Great Retail Apocalypse”.  Unfortunately, many hearing healthcare providers are failing to fully grasp how that’s impacting the hearing aid industry. If anything, hearing aid consumers are a bit behind other consumers when it comes to using the internet to research and to make a purchase.  As we age, we’re less likely to want to figure out new ways to buy what we want.    But if by learning a new trick or two, the average consumer can (in their mind) save thousands of dollars, they’ll figure it out and in a hurry.

Buying a Chandelier

Back to the chandelier…I am in the market for lights that will hang over an island. Store displays are limited, so I started my search online. I knew the color, size and shape that I wanted. Eventually I found just what I was looking for. I read the reviews about the lights and one reviewer mentioned seeing the exact same light for half the price.

I did a reverse image search and sure enough found the exact same light for more than 50% off the price of the original light, however, the manufacturer was not the same. Initially I figured the light was somehow different, so I researched the new company and found that the first company manufactures a few of its products under a different name. It sells one product line to higher end stores and one to discount stores…. same light.

I ordered 2 chandeliers that should arrive today.

Price, Quality, Quantity Pick Two

What does this mean for you? It means that your consumer is potentially online learning everything they can about hearing loss and hearing aids. By way of an example, I pulled the trigger on my chandelier purchase (all things being the same in my mind) based on price.  That does not mean I bought chandeliers for $1 a piece.  It means, I had a certain quantity that could not be changed and a certain quality that I wanted.  I would’ve paid the original price but I was willing to spend time searching for the lowest price possible.  Something that the Internet makes extremely easy to do.  And if it works for other purchases they’ve been making, why wouldn’t they at least consider trying the same approach for a product that costs thousands of dollars?

Purchasing decisions are based on selecting 2 of the following 3 options (price, quality and quantity).  You can select 2 of those options, but not all 3.

If you can’t compete on price

And you can’t compete on quantity (you are selling either 1 product or 2 products)

Quality is all you have left.

Educate them about the benefits of seeing you and why they shouldn’t buy hearing aids online. Amazon sells hearing aids online and Alibaba, Amazon’s biggest competitor sells hearing aids from China.

I am your demographic and if I was in the market for a hearing aid, I would take the same approach to purchasing a hearing aid that I did to purchasing a chandelier.  You need to give me compelling reasons not to treat a hearing aid purchase in the same way that I would treat the purchase of a chandelier. In fact, if you can’t give me a list of 5 reasons that I shouldn’t buy my hearing aids online for the lowest price I can find, then you have a problem that needs to be resolved today.

The Trick to Being a Better Boss

Not everyone is great boss.  In reality there are probably very few people who would describe themselves as a great boss.  A great boss according to Steve Tobak of Inc. has the following traits:

Traits of a Great Boss

  • They hold themselves and others accountable.
  • They’re not full of surprises.
  • They fix things.
  • They have a feel for the business.
  • They get the job done.
  • They manage up and sideways effectively.
  • They’re awesome decision-makers.
  • They’re effective, not productive.
  • They live for their jobs.
  • They have a sense of humor, humility, and empathy.

Doesn’t Sound Anything Like You?

If the above sounds nothing like you.  And you’re pretty sure it never will, it’s time for Plan B. In a large company it’s possible to insulate yourself from the aspects of leadership that you know you lack by hiring managers who possess those qualities.  But what do you do when you’re the leader of a group of 10 or fewer employees?

This is a great time and place for well-defined office policies and procedures.  Yes, everyone understands that you are responsible if not for the creation at least for the implementation of “the policy”.  The policy manual should be read and signed as part of any job offer so that each employee understands the office policies and procedures. However the burden of responsibility to react to unreasonable, irrational or unrealistic requests from employees is shifted from you to “the policy”.  For example,

Request – “Dr. Jones, my sister is being married in Canada and I need 3 days before the wedding to travel.”

Response – “Congratulations to you and your family Jane, your personal leave time will cover 2 of those three days.”

The Good News

You aren’t required to become emotionally involved.  They’ve supplied a request, you don’t need to assess whether or not it’s reasonable or realistic.  The policy you have in place allows you to provide an answer.  They may not like the answer, but it’s hard to argue with a policy they agreed to from the start.

In the beginning there will be a learning curve as you begin to implement the policies.  Over time and especially with new employees deferring to the policy manual will become second nature.  Make sure to update the manual frequently as issues arise.  While you can’t foresee every conceivable circumstance that might arise, frequent updates will ensure that you come close.

Are You in Panic Mode?

The independent hearing healthcare provider is being confronted by a variety of outside influences unlike anything they’ve ever seen.

  • 3rd party insurances that that you feel a need to accept but a rate that leaves little room for profit.
  • Online retailers who compete solely on the basis of price, using ad campaigns that are a direct violation of HIPAA.
  • An average cost per lead has tripled in the past decade, meaning you’re spending 3 times as much to attract the same number of new patients.

The only difference between a problem and an opportunity is in the mind. A problem means that there is no clear solution, while an opportunity means there is a chance to exercise creativity.

Steps to a Solution

Step 1
Stop panicking. It’s a complete waste of time and energy.

Step 2
Assess the situation. What can you control and what is outside of your control?

Step 3
Understand why the outside influences are becoming more and more effective. Instead, evaluate other industries. It’s easy to view the loss of business as being solely driven by price. However every industry has successful enterprises at a variety of price points.

What I’m suggesting you do is to evaluate why some businesses thrive at a price point significantly higher than their competitors. I’ll give you one possible reason why… value. They compete on value, not price. Competing on price alone, while it can be done is a risky proposition.

Only one company can truly have the lowest price and if all you do is tie them, customers will look for another point of differentiation. You will end up in the same place you are now, but with less money in your pocket. Given the volume of purchases of the small business owner compared to large chains, online retailers and box stores…competing on price is futile.

Compete on Value

Start by understanding your customer.

I know that you think you understand your demographic, but do you really?

Who will be using your product or service?

Do your potential customers still fit the demographic model that they did 10 years ago? Are they older or younger, what is their income level, educational level?

How does your prospect make buying decisions?

The sales cycle for most products and services is no longer a nice, neat linear process. Instead the cycle has become much more complicated. Potential customers have the ability to research a vast amount of information about a product or service (price point, reviews of the product, technical data) and compare the data across any number of providers.

How does the competition promote, price and sell its product or service?

Here’s how you’ll build this knowledge base:

  • Read what your customers are reading.
  • Know what your competitors are doing and saying both on and offline.
  • Attend an event where your prospects, customers, or other market players are speaking.
  • Record the information you gather and and analyze patterns.
  • Identify opportunities, so you can discuss them with your customers and prospects

Yes, this is a lot of work. But the payoff can be tremendous.

Deliver Value

Define the value you will be delivering.

Starbucks and Whole Foods are two examples of companies that offer products sold by their competitors for significantly less. Both companies have defined the experience their customers can expect each time and they deliver on that promise. Those experiences have been deemed by the customer to be worth the higher price point.

Kmart and Sears are excellent examples of companies that competed on price.  They failed to understand and respond quickly to changes in the marketplace and the inevitable is about to occur (Read More Here)

If you fail to deliver… fix the problem, IMMEDIATELY. In the age of social media, time is of the essence. You’ve heard the adage that that 1 unhappy customer will tell the story of their experience to somewhere between 9 – 15 people. With the ability to post their unhappy experience online you might be looking back on that 9-15 number with fondness as the number of people who view your customers story and share it with ours enters triple digits.

No one ever said running your own business would be easy. And if it has been easy, those days have come to an end. The information above is just the proverbial tip of the iceberg. If you’re ready to get serious abut making money from your practice, give us a call. We know what to do.

Giving Gifts to Referral Sources

It’s that time of year. You’ve been busy, extremely busy. As a small business owner you not only handle or at a minimum oversee everything going on in your business you also have a personal life. And this time of year is extra crazy both personally and professionally. You’ve started to panic because you have yet to think about gifts for employees or send out gifts to clients or to referral sources.

Step One, Stop Panicking

You don’t have to wait for the traditional holiday season to give gifts to associates and clients. In fact there’s an argument to be made for choosing an alternate time of the year. Chances are your gift is one of many they’ll be receiving during this time of the year. A thank you that appears in the middle of February all by itself is much more likely to be remembered. Or send a birthday gift instead of a traditional thank you. It’s bound to impress, since it show’s that you’ve bothered to learn a thing or two about the recipient.

Still Want to Send Something in Time For the Holidays?

Opt for food.  It’s easy to give and it’s easy to receive.  If it’s an assortment of food the recipient is bound to like something in the basket.  Take into consideration any dietary and/or religious restrictions (i.e. a kosher office).  Harry and David’s offers kosher baskets.  And cut yourself some slack.  A creative gift while great in theory, unless you know the recipient extremely well will often miss the mark.  Leaving the recipient with really no gift at all.

Remember, Gift Giving is Marketing

Any interaction with a client or referral source should be considered marketing and this should mostly definitely extend to gift giving.

From R. McKenna, Harvard Business Review

There is a paradigm for marketing, a model that depends on the marketer’s knowledge, experience, and ability to integrate the customer and the company. Six principles are at the heart of the new marketing. The first, “Marketing is everything and everything is marketing,” suggests that marketing is like quality. It is not a function but an all-pervasive way of doing business.
Thinking carefully about a gift for your client or referral has the potential to strengthen the relationship you already have so choose wisely.

The Importance of a Non-Compete Agreement

You own a small business and employ a handful of people. Should you require a non-compete agreement. The answer is yes, you should. You will be investing resources (time and money) into the training of any employee. You also have a customer base and other potentially key information that may be crucial to your success. The noncompete agreement is a form of protection against losses. Your company does not wish to invest in an employee only to see the employee take the skills acquired, or the company’s customers, to another employer.

Agreement Rules to Follow

  • Not every employee should be required to sign a non-compete, typically that’s reserved for just the professional staff.
  • Do not attempt to make the geographical constraints of the non-compete so large that it won’t stand up to a challenge in court (your employees have rights too).
  • Make sure you provide any potential professional employee with a copy of the non-compete for them to review before they take the job.
  • Make sure signing the non-compete is one of the first things the new hiree does. Nothing looks worse in a court of law than a non-compete that was signed 6 months after the employee was hired.

Enforcing a Non-Compete

Should you attempt to enforce a non-compete? Of course you should that’s why you created one in the first place. A member of your professional staff has given you their two weeks notice. Schedule an exit interview (yes that is something you should be doing anytime any employee leaves). During the course of the interview discuss the terms of the non-compete agreement. If you’ve structured a fair agreement and they were given ample time to review the terms of the agreement prior to agreeing to become your employee there is no reason why you shouldn’t fully expect them to abide by the terms of the agreement.

The Best Way to Improve Client Relations & Manage Employees

We all know how important customer service is in every business. But how do you instill the importance of respecting customers into your employees? Company culture. Your company’s culture is a large factor in the behavior of employees on the job. If you feel you must always look over your employees shoulder, or micromanage them, they may not be the ones to blame. Marissa Levin of Inc. illustrates this concept in her article about a poorly managed restaurant.

“Not many other jobs teach a strong, collaborative work ethic like waiting tables. It is an amazing training ground for future jobs. It requires servers to work with all kinds of people, to adapt quickly, to read people accurately, and to work as a team. It requires high emotional intelligence.

Every team member  – servers, hostesses, bartenders, busboys, dishwashers, cooks – impacts the overall customer experience.

Owning a restaurant is also one of the hardest entrepreneurial ventures. 60 percent of new restaurants fail in the first year; 80 percent don’t make it to five years.

Two of the main reasons restaurants fail are bad people management, and spotty customer service.

Imagine my surprise when I read about the deplorable behaviors of the wait-staff at one of Arlington, Virginia’s top Asian restaurants, Peter Chang.

The waiters added disparaging comments about the customers onto the check, and then forgot to delete them when they presented the check to the customer. When caught, they were not apologetic. They found it to be funny.

That’s not the shocking part of the story.

I was stunned to read that this behavior is accepted at this restaurant, and that the leadership team does nothing to stop it. There is no accountability for offensive behavior, which basically grants approval and permission for this behavior to continue.

This incident conveys that the organizational culture tolerates customer disrespect. Manager Qien Chang said that servers had been previously warned about leaving offensive comments on checks. “They always do that. I’ve told them so many times.”

Peter Chang’s culture is not a culture of accountability. It is a culture of disrespect.

In cultures of accountability, every team member commits to meeting or exceeding the company’s goals.  Employees understand their connection to the organization’s success.

I completely understand that the servers saw no real harm in their actions. And, really, it’s not their fault. They’ve been poorly trained by a management team that did not convey the importance of customer respect. This has nothing to do with age or experience. This is a direct reflection of leadership.

Ultimately, leadership dictates the core values and the culture of an organization. They must model the accepted behaviors, and institute firm consequences for those that challenge the values system.

Customer respect is a learned behavior, stemming from the top.  Qien Chang could learn a few things from Troy Guard, chef and owner of TAG Restaurant Group in Denver, CO. One of his 7 values is Caring. “This is so important–not just for the restaurant, but for life. You need to care for yourself, care for your team, care for your guests, care for your community.

If you don’t care, why should anyone else?”