My dad and his brother started the business about 40 years ago. My dad was the alpha dog – did sales and operations while my uncle took care of the office and administrative work. We are a manufacturing and service business – we build and repair pumps.
In the late 80’s my uncle was diagnosed with Parkinson’s and had to reduce his work schedule. After a year or so my uncle’s health had declined to the point where he retired and then my dad ended up buying his brother’s share of the business.
My uncle’s two daughters worked in the accounting area and I worked for my dad in sales and marketing. When my uncle left the business, one of his daughters took on the management of the accounting section and the other split her time between accounting and inventory management.
Three years ago my dad retired and I took over the business. A year later we were growing fairly fast and I decided to hire a professional comptroller.
A few months later the comptroller called me at home one evening and said he needed to talk to me. He came over to the house and told me that it appeared that my cousin was diverting funds from the company to her own account – and he had the paperwork to back up his suspicions. You could have knocked me over with a feather!
Further investigation uncovered the extent of the problem – over $75,000 of company funds stolen and it involved both cousins.
My advice to other family businesses that have family in the key management positions such as accounting, purchasing, inventory control, etc., make sure you have a system of checks and balances in the system to defend against the situation that happened to us. There is an old Russian proverb – “Trust but verify!”