What is in this article?:
- How to handle embezzlement in a family-owned restaurant business
- Take action
Diversion of a restaurant’s assets for a family member’s personal use, even if done innocently, must be dealt with before it escalates and causes serious damage to the business.
Hearing about embezzlement in a public company rarely shocks anyone, but when it happens in a family business, people are often stunned. “How could he steal from his own family?” “Doesn’t she know she’s hurting her siblings/cousins/parents?”
As tough and painful as embezzlement is, it’s not as uncommon as many of us would like to think. Sure, the kind of embezzlement that results in jail time is rare, but other levels of it occur daily.
How could this happen? Many factors lead to embezzlement, including chronic financial strain, a general sense of family entitlement, lack of internal company controls and the reality or perception of being overworked and underpaid. To make matters worse, often the embezzler doesn’t even know that what he or she is doing is wrong.
Here’s an example of how embezzlement can start small and quickly grow: Jim (the business owner’s son) fills up his gas tank once on a Friday and pays for it with the business account, knowing that the miles he drives will be primarily for personal, not business reasons. He tells himself it’s okay because he has filled the tank on his own some weekends and used “his gas” for business use on Monday and Tuesday. Then he takes a few vacation days and doesn’t record it as paid time off. He picks up gift cards for employee recognition and pockets a few for himself. He knows that Dad pays him less than local competitors, and this is the way he evens it out. He notices other family members treating the business similarly, so it simply becomes the “way we do things around here”—it is their company culture, not embezzlement.
The misuse of company assets, time and money escalates. Soon, Jim adds a nonworking family member to payroll, petty cash disappears, one out of ten customer checks is rerouted to Jim’s personal account and personal items are consistently charged to the business credit card. Eventually, an employee in accounting notices and agonizes about who and when to tell.
So while embezzlement starts small and often innocently in a family business, it can quickly escalate to something big that damages the business, hurts nonfamily employee morale and breaks family trust.