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Worried About Losses Due to Theft? Look at Your Employees First

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Worried About Losses Due to Theft? Look at Your Employees First

 

Often businesses are concerned about the loss of revenue from the occasional shoplifter or burglary. Although both situations can cause financial damage to a business, most losses due to this type of theft comprise a small percentage of losses a business will incur. Instead, theft by employees often causes significantly greater financial damage to a business and can even lead to the financial failure of a business.

It’s great to have fully-trustworthy employees that a business can utilize worry-free. Unfortunately, if national statistics are any indication, a fully-trustworthy employee may be more difficult to find than ever before.

Statistics Reveal a Huge Threat

According to recent studies by law enforcement and insurance groups, American businesses lose a staggering $50 billion per year to employee theft, which translates into approximately 7 percent of a business’s annual revenue. In fact, employee theft has been determined to be a primary cause for fully one-third of recent business bankruptcies.

Just as alarming, these studies have also determined that 75 percent of employees steal at least once from their employers and (more importantly for the long-term financial health of the business) half of that group steals repeatedly. Furthermore, employees are responsible for a greater proportion of inventory shrinkage every year than shoplifters—43 percent to 36 percent respectively.

Where to Look

The first step for any business seeking to address the problem of employee theft is to identify where theft most commonly occurs in the workplace. Perhaps most obvious is anywhere cash is being handled or changes hands. This can include cash transactions, payments, and access to petty cash. Another area to identify where employee theft occurs which is less obvious but often causes greater damage is the company’s books or recordkeeping. Here, payments might be recorded by an employee who is entrusted with recordkeeping for the business but routed to an account created by that employee.

In service, construction, or trade industries employees might also make side deals with vendors to create phony invoices and then split the money with their accomplices. As another area in construction or trade industries might see an employee utilize company equipment or resources for their own personal use to make money on the side.

Warning Signs of Employee Theft

If you are suspicious that employees are engaged in theft, personal behavior can provide warning signs that point to larger problems. These warning signs often include:

  • Employees living above their means with extravagant or a large volume of purchases.
  • Signs of substance abuse.
  • Secretive conversations among employees.
  • Periods of unusually low levels of sales transactions.
  • Taking procedural shortcuts to expedite deliveries.
  • Changing work habits—arriving early, before anyone else, for “quiet time” or working through lunch or after hours when other individuals are not present.
  • Excessive or unexplained absences.
  • Employees who want to work alone, physically out of sight.
  • Missing items.

If you are operating a business that may be experiencing employee theft, there are steps you can take to protect yourself and your business. Check back for the next installment of our four – part series on identifying and preventing employee theft to find out what you can do.

You are reading part one of our series on Employee Theft.
For part two of our series on Employee Theft click here.
For part three of our series on Employee Theft click here.
For the final installment of our series on Employee Theft click here.

© 2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Book Review: The Go Getter—It Shall Be Done

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Often times business owners will recommend books to their new employees and office staff.   One book repeatedly recommended is a classic: The Go Getter by Peter B. Kyne. I have noticed that this book is also recommended by nationally-known business and success coaches to entry-level executives and sales staff.  In fact, several newer publications of the book include a preface written by one nationally-known and successful individual or another.   These books also contain a modern or more-detailed explanation than what is found in the original book. What makes this book (and the modern variations that have appeared since) popular today?   I believe this popularity is based on the motto of one of the primary characters – “It shall be done.”

The Go Getter was first published in 1921.   Its author, Peter B. Kyne (1880-1957), is unique among business success authors because all indications suggest that he did not set out to write a book about business or success.   Mr. Kyne was an author of short stories and movie screenplays, often set in the San Francisco Bay Area.   The Go Getter is no different and contains a character, Capt. Cappy Ricks, who appears in other Kyne stories of the same period.   The character who sets this book apart from Mr. Kyne’s other short stories is a young World War I veteran, William E. Peck.

The story opens with Cappy Ricks, an older, highly successful California lumberman, complaining about the lack of initiative and integrity among certain of his employees.   At this moment, William Peck enters the office of Cappy Ricks. William Peck is seeking employment and though he has been already been rejected by several other businesses and by Cappy Ricks’ own staff as well. Mr. Peck is undeterred by these previous rejections, and seeks employment directly from Cappy Ricks.   Mr. Peck’s physical appearance sets him apart from most other potential job hunters.   As a disabled veteran from World War I, he walks with a prominent limp and has lost part of one arm.     Although no positions are currently available, Cappy Ricks is impressed by William Peck’s positive attitude, including his initiative of printing business cards labeling him as an employee of Mr. Ricks before he has been hired. Mr. Ricks decides to take a chance and hire Mr. Peck.

Mr. Peck is then given the most difficult sales assignment—selling skunk spruce lumber. He immediately begins to crisscross the Western United States and quickly sells out of this challenging merchandise.   After his success, Mr. Peck is given better products and assignments, which he also successfully sells without neither problem nor complaint.

As the story continues, an important job opening becomes available in the company’s Shanghai office. The main candidate for the position is William Peck.   However, before Cappy Ricks will feel confident about extending the job offer to Mr. Peck, there is one last challenge for the young veteran.   Mr. Peck must complete the purchase of a specific blue vase and deliver it to Cappy Ricks before he leaves town that evening. The vase is to be given as a present for a friend at Mr. Ricks’ travel destination.

This “simple” assignment becomes far more complicated than Cappy Ricks originally suggested.   A good portion of the remainder of the story follows William Peck as he overcomes multiple, roadblocks, misinformation, both time and monetary constraints, as well as uncooperative individuals in order to both procure the vase and transport it to Cappy Ricks before his scheduled event since he missed the original delivery deadline. This assignment culminates with William Peck providing the only item of great monetary value he possessed as collateral in order to purchase the vase and then recruiting a pilot friend to fly him to a location where he could intercept a train to deliver the desired vase directly to Cappy Ricks.

Ricks is surprised and delighted to have the desired vase presented to him by William Peck on his train in the middle of the night.   The surprise stems from the knowledge that Ricks deliberately designed an assignment that was impossible to complete. In fact, Cappy Ricks had utilized this test to assess potential candidates for years, including the current executives in his company, with no one actually succeeding. Often times, the candidates would become frustrated and would quit once the first roadblocks were encountered. Some had resorted to breaking into the shop to illegally acquire the vase. William Peck was the only person who, with a positive attitude and perseverance, accomplished the task.

When asked by Cappy Ricks how he developed his “go-getter” attitude, Mr. Peck relayed the story of his experiences after he received severe injuries during the war. While in bed, wounded, suffering from his multiple injuries, and wondering whether it was worthwhile to go on, he was reminded by his commander of his brigade’s motto “It Shall Be Done.” No matter how difficult the task or roadblocks placed before him, having the attitude of “It shall be done” always allowed him to find a way to overcome whatever challenge was placed before him.

Oftentimes people will become discouraged as they encounter roadblocks along their way. They quit trying and then provide varying excuses which blame forces allegedly outside their control for their failure.   Those who are successful know that multiple roadblocks and setbacks will occur in anything worthwhile to pursue.   Instead of quitting, these individuals move forward, overcome obstacles, look at a failure as a learning opportunity, adapt, evolve, and to find a way to succeed.   These individuals are the real life “go-getters.”

 

©2015 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

 

Statutes of Limitation for Arizona Businesses

 

Although no business owner likes to contemplate the idea of being sued or pursuing a lawsuit, civil suits are an inevitable part of the cost of doing business. When a dispute arises, an important first step is determining the deadline for filing a claim. This deadline is known as a “statute of limitations.” If an individual fails to file their claim by this deadline, he or she is barred from pursuing that specific claim.

Arizona business owners should familiarize themselves with some of the most common statutes of limitation they may face, these statutes of limitation include:

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Breach of Contract

The statute of limitations for oral breach of contract is three years and is governed by Ariz. Rev. Stat. Ann. Section 12-543(1). The statute is six years for written breach of contract under Section 12-548. The statute of limitations for breach of contract for a sale is four years. This deadline is governed by Sections 12-544(4) and 47-2725(A) of the Arizona Revised Statutes.

Breach of Fiduciary Duty

A fiduciary duty is a legal responsibility to act in the best interest of another person or organization, including a business. For example, a board of directors has a fiduciary duty to act in the best interest of its shareholders. In Arizona, the statute of limitations for breach of fiduciary duty is two years. These deadlines are outlined in Ariz. Rev. Stat. Ann. §12-542.

Consumer Fraud

Like most states, Arizona has legislation in place that protects the public from deceptive business practices that prey upon consumers. In Arizona, a seller or advertiser of objects, wares, goods, commodities, intangibles, real estate, or services engages in “consumer fraud” when it suppresses, conceals, adds, or fails to disclose a material fact through deception, an unfair act or practice, a false statement, a false pretense, a false promise, or a misrepresentation. The statute of limitations for consumer fraud in Arizona is just one year and is found under Ariz. Rev. Stat. Ann. § 12-541(5).

Negligent Misrepresentation

According to the Restatement of Torts (2d) § 552, negligent misrepresentation occurs when “one who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions, is subject to liability for pecuniary loss caused to them by their justifiable reliance upon the information, if he fails to exercise reasonable care or competence in obtaining or communicating the information.” Under Section 12-542 of the Arizona Revised Statutes, the statute of limitations for this cause of action is two years.

© 2014 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Common Pitfalls of Commercial Leases

 

How Commercial Tenants Can Protect Themselves

When it comes to renting space for your business, location is key. Whether your business thrives or fails depends largely on where you choose to initially operate your business. What many business owners fail to realize, however, is that the terms of your commercial lease are just as important as the location. Before a business owner enters into a commercial lease, it is important to understand how commercial leases are different from their residential counterparts. It is also useful to take a look at some standard commercial lease terms and what they mean for your business.

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Commercial Leases Are Different from Residential Leases

If you are a long-time apartment-dweller or you’re simply familiar with residential leases, it is important to recognize that commercial leases are far different from residential lease agreements. Whereas most residential leases are for short terms – typically for one year – commercial leases tend to include much longer terms, with some commercial lease contracts spanning several years. With so much money tied up in a single lease agreement, you could find yourself in a financial bind if you need to end your relationship with your commercial landlord before the expiration of your lease.

Additionally, commercial leases also offer none of the consumer protection guarantees of residential leases. However, commercial leases generally offer a tenant much more leverage, flexibility, and negotiating power than a residential lease. Commercial landlords want to rent their space to a profitable business – they know they have a better chance of receiving their rent if your business succeeds. Hence, commercial landlords are generally more inclined to negotiate lease terms with their tenants and offer concessions to draw the right commercial tenant to their location.

Important Commercial Lease Terms

When it comes to commercial lease agreements, boilerplate legal documents are rarely a good solution. Your business is unique; your legal documents should be unique as well. There are, however, several standard provisions that generally appear in every commercial lease. Knowing what these terms mean will help you feel more confident when it is time to negotiate your own commercial lease agreement.

Use Provisions

You have probably seen a busy intersection with two or more gas stations sitting directly across the street from one other. This is an example of business “clustering”, which is something certain types of businesses do in an attempt to capture a larger portion of a specific market share. Clustering is not a good idea for all types of business, and it might spell disaster for yours. For example, a small mom-and-pop pizza shop is unlikely to last long if a major fast food pizza chain moves in right next door. Use provisions within commercial leases are designed to prevent these scenarios from happening. They define how the tenant intends to use the premises as well as limit the types of tenants permitted to occupy adjoining spaces.

Property and Facility Maintenance

When drafting a commercial lease for your business, it is critically important to define which party is responsible for maintaining the building and its interior. Although it may seem obvious that a landlord is in charge of repairing things like broken HVAC systems and leaking roofs, other items aren’t so clear-cut. What happens when a tenant conducts an extensive build-out? If a tenant bears the cost of new carpeting, shelving, and electrical wiring, is the landlord still obligated to fix these items if something fails? What if the tenant installs new signage? Who is responsible for repair costs pays for broken neon in one of the sign’s letters? These are all items that have the potential to create serious and costly conflicts if not addressed in the commercial lease agreement.

Personal Guaranties

Commercial landlords commonly require a commercial tenant to provide a personal guarantee in the lease. If you have organized your business as a corporation, this completely obviates the personal liability protection of your corporate business entity and exposes personal assets, like your home, to your landlord and your other creditors should you default on a commercial lease. If the business defaults on the lease, the owners can be personally liable for all the damages incurred to the commercial landlord for the entire term of the lease—including the commercial landlord’s attorneys’ fees, costs and defenses.   An owner should be careful in agreeing to provide a personal guarantee unless absolutely necessary or negotiate limitations to the potential damages the commercial landlord can obtain if a default occurs.

Landlord’s Breach and Default

Occasionally, a commercial landlord will end an agreement before the end of the lease term.  This can seriously disrupt a business and interrupt a business owner’s income stream as he or she scrambles to find new space and bears the cost of relocating and advertising a new location.  Tenants can protect themselves by including generous grace periods in their lease agreements and requiring landlords to mitigate any tenant damages incurred as a result of the landlord’s breach.

© 2014 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

This website has been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.

Book Review: Extraordinary Popular Delusions and The Madness of Crowds—Avoid Following the Herd

 

In the 2011 film Salmon Fishing in the Yemen, a life-changing decision by the character, Dr. Alfred Jones, is symbolized when he turns himself around and walks against the current of a crowd that is all traveling the same direction on a sidewalk. Often success in business comes from avoiding the follies of the group and independently developing a different plan. The first and still considered one of the best, books on this subject is Extraordinary Popular Delusions and The Madness of Crowds by Charles Mackay. Its principles and examples of group behavior are just as important today as they were when they were first published in 1841.

The author, Charles Mackay (1812-1889), was a Scottish journalist and author.   While a journalist, he researched and compiled the accounts that form the basis of the two volumes known as Extraordinary Popular Delusions and The Madness of Crowds. Unlike the popular sensational journalism of the time, Mackay provided several heavily-researched and detailed historical anecdotes of the pitfalls of group behavior. His examples of the problems that occur with group behavior have been used by modern social psychologists and economists to describe the dysfunctions of following “the crowd.” It is also often cited by analysts to explain the boom to bust behavior that perpetuates in stock markets.

A general theme found in Mackay’s book is that humans have the tendency to develop a herd mentality. The individuals in the herd then act and react to one stimulus after another in similar and predictable ways.  Mackay theorized when the herd develops “a madness” it can lead to a downward spiral of behaviors that often have very negative consequences. In addition, once this madness occurs it is usually takes individuals, with great difficulty, to break with the norm in order to stop the behavior.

Mackay narrates several historical events to illustrate the negative (and sometimes bizarre) effects that can arise out of a group mentality. These events include the Mississippi Company bubble, the Witch Mania (It wasn’t just in Salem, Massachusetts.), and the South Sea Company bubble as examples of when a group of seemingly rational individuals developed irrational thoughts and behaviors that led to very negative consequences.

The often-cited example in Extraordinary Popular Delusions and The Madness of Crowds is the Tulip Mania, which arose in Europe in the 1600s. The tulip, a simple flower, with its origins in Constantinople, was at first a novelty item for the very wealthy in Europe. Tulip bulbs then evolved from novelty item to status symbol for the upper and middle classes where they became the concentration of serious financial speculation. As the mania amplified, tulip bulbs began being purchased by investors and merchants who utilized most (if not all) of their assets. Producers sold the bulbs for property, gold, and monetary amounts that still seem exorbitant by today’s standards. This pattern of “madness” devolved into wild speculation and hoarding which tainted the region’s economic markets. As often occurs, the speculation then piloted a downward spiral that depressed markets and negatively affected producers for years.

The power in the message of Extraordinary Popular Delusions and The Madness of Crowds is in its timelessness. These same fits of “madness” can be seen today by simply opening the newspaper.   The modern-day observer need only look as far as Cabbage Patch Doll fever in the 1980’s, the Beanie Baby craze of the 1990’s, or the real estate market crash of the last decade as modern-day “tulips.” Other recent examples which appear a few times a year are the crowds of people who camp out for days in order to purchase the newest technological gadget, which can be purchased a couple of weeks (sometimes only days) later by simply walking into the store. Then there are examples of the tensions which dissolve into fights seemingly every Black Friday over a $25 toy at the big-box store, the stock market tech bubble, the successful fraudulent financial schemes orchestrated by Bernie Madoff and similar individuals. The list goes on…

The primary goal as an individual and businessperson is to notice when this herd mentality occurs and to avoid being swept up in the “madness” that can often have disastrous results.  As in Salmon Fishing in the Yemen, going against the current of a crowd will serve your personal and business interests well. Success will often come from avoiding the follies of the group and independently developing a different plan.

© 2014 Matthew W. Harrison and Harrison Law, PLLC All Rights Reserved

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This website and article have been prepared by Harrison Law, PLLC for informational purposes only and does not, and is not intended to, constitute legal or financial advice. The information is not provided in the course of an attorney-client relationship and is not intended to substitute for legal advice from an attorney licensed in your jurisdiction.