As he hung up the phone, Carl wasn’t sure whether he should throw something, cry or just run away. A customer had just informed him that he was suing his company for damages resulting from a leaking pipe connection after a water heater replacement.
Normally, this would simply be a matter of calling the insurance company, but in this case, the only invoice he had for that date was for a “Dispatch Fee Only.” The invoice showed that a water heater replacement was quoted but the customer had declined the service. A reconstruction of the day in question showed that this was Bill’s last job of the day and he had gone home early.
At one time, Bill was one of Carl’s better producers, always at the top of the sales list, willing to do what it took to get the job done. But during the past six months, his “DF Only” tickets were becoming more frequent. Often, Bill would knock off a bit early and could seldom be counted on to take care of a last-minute high-priority call. The pieces all came together for Carl with this nightmarish phone call.
Since Carl’s company hadn’t actually done the work, his insurance company didn’t feel obligated to pay for damages. Justice would dictate that it’s a problem between two private parties, unrelated to Carl’s company. But since when do trial lawyers in civil court care about justice? Bill was in Carl’s truck, wearing Carl’s uniform when the work was performed, so as far as the lawyer was concerned, Carl was on the hook.
Carl could fight the claim and if he lost, he’d have a case for bringing his insurance company into the game. Win or lose, he loses a few thousand dollars in legal fees, he loses a long-time customer and he loses a top-notch employee. Not to mention days of grief and many hours of distraction from running the business.
There was one other casualty; Carl’s trust in his fellow man took a severe blow this day.
Every day you send out a service truck, you’re leaving yourself vulnerable for shenanigans that may ultimately take money out of your pocket. Besides the side job fiasco above, here are some other ways your trusted employees can take you to the cleaners.
One of the easiest tricks is to offer a customer substantial discounts on selected services while on a job. Your tech could offer to just “clock out” for a half-hour lunch break, take care of the customer’s problem with “private stock,” and collect a separate check or cash for the work.
Other common tactics include using your trucks for personal errands or filling the tank of their personal vehicle while filling the tank of your truck. Rewriting cash invoices and pocketing the difference is also a possibility.
Then there are seemingly gray areas to consider, such as who gets the rights to the scrap on a job? Before you say the plumber gets it, think about those 2-foot-long lengths of type L that find their way into the scrap bin.
Can It Be Your Fault?
Failure to oversee, or at least show some interest in, accountability is one way you, the shop owner, can set the stage for embezzlement. But do you actively promote financial wrongdoing by your employees?
Answer the following “yes/no” questions. If you attempt to rationalize any answer, check the “yes” box.
- Yes__ No__ If a cashier returns too much
change, I keep it.
Yes__ No__ If my supplier over ships an order without charging for it, I keep quiet about it.
Yes__ No__ I have kept one or more cash invoices off the books.
Yes__ No__ I have kept quiet when an employee accidentally under-reported his or her hours.
Yes__ No__ I have paid bonuses “off the books” in order to side-step FICA taxes or overtime.
Yes__ No__ I have made side deals with employees of customers in order to gain business.
Yes__ No__ I have paid off inspectors in order to get approvals.
Yes__ No__ I have misrepresented products or services in order to get a sale.
Yes__ No__ I teach my field techs how to use “little white lies” to help make a sale.
Yes__ No__ I have reported defective shipments when items were actually damaged in the field.
Your message: Do whatever it takes to make a buck, anything goes. In some cases, you may have a legitimate reason for walking in the shadows, but your employees see it more as black and white. They don’t understand your shades of gray. Once you go down that path, you’re basically giving them the green light to operate with their own value system, one that may have a lower standard than yours.
“Tech justice” is another driver of tech embezzlement. They could simply be tired of broken promises or having to deal with moving targets in order to earn a bonus. Know this: Your service technicians have a code of honor that may not coincide with yours. They will find a way to get justice of their own if they feel like they have been cheated of money or recognition or if they feel like the company is being disingenuous toward customers and suppliers.
Sunshine, The Best Medicine
Let’s face it, the only way to make sure there’s no larceny in your shop is for you to be the only one there, assuming that you’re honest. If you ever hope to build an empire, being a loner is not part of the plan. You’re going to have to trust someone. Here are some basic procedures to help you “trust but verify.”
- Serialize all invoices and require accountability for each one, even if it is voided. This prevents side work and rewriting invoices for cash.
- Consider opening your books to your employees. This shines the light on why it costs so much to perform service so they won’t feel like they’re robbing clients.
- Be very clear and simple about wages and bonuses. Base them on simple-to-track measures such as hours, billable hours sold, gross dollars sold, etc.
- Be very clear about vehicle use. Whatever your policy is, make sure everyone understands it.
- Consider GPS tracking on vehicles. Techs may initially feel that it’s about mistrust, but once they see how it improves dispatch efficiency, they’ll appreciate it.
- Implement a zero tolerance “no side work” policy. If your techs and plumbers feel they need to work extra, then you’re not offering them enough to do.
- From time to time, compare each truck’s monthly inventory costs to the materials costs budgeted for the work they have sold. You don’t have to count every cone washer, but if an individual varies considerably from the company averages, you may need to look closer.
- Watch for a high rate of “No Sale” trips, especially if sales performance is part of your compensation package. There could be some side deals being performed. Most importantly, make the position one that they don’t want to lose. When an employee steals from an employer, they have decided that their job is not all that important. It’s your job to make your company as compelling as possible.
The bottom line: Your employees may have the capacity to steal from the company, but you’re responsible for the company culture. If your company culture promotes illicit actions, then don’t be surprised when they happen.