You’re losing money – where is it going?

The results of the 2018 Director Sentiment Survey are interesting. There has been a 25% lift in the number of boards assessing ethical risks. Some of this will have been driven by the reviews into franchising and bank behaviour in Australia, but the issues for most business owners are much closer to home.

The police will tell you there are two types of businesses; those that have been stolen from, and those that don’t know it yet. In the current economy, the risk of theft in your business is very real.

For many, business is good. Turnover is up and things feel comfortable. In times like these the focus on spending and controls can slip because the bottom line is healthy. That false sense of security is gold to a thief.

Financial pressure, addictions, gambling and lifestyle are all on the list of reasons we hear for why someone might steal from you. You may not see it coming but it will hurt when you find out.

One of the best indicators someone is stealing from you is your gross profit percentage. This is the margin you are getting from your sales. If something has cost you $40 and you sell it for $100, you have made a gross profit of $60 or put another way, a GP of 60%.

In business, if your costs go up, ideally so will your prices. Yes, there are occasions when we discount and absorb cost increases, but that will have been a conscious decision.

In all other cases, you will be trying to keep that margin the same. So, what does it tell you if the GP percent drops?

  • It might tell you the stock you have purchased has been stolen. The cost is there, but there is no sale.
  • It might tell you that the sale has been made, but the cash from the sale has been stolen.
  • It might tell you the stock you have purchased is being damaged or wasted. Once again, the cost is there, but there is no sale

Theft isn’t confined to the young recruit you don’t really know. International studies suggest more than half those caught stealing are aged between 31 and 45. Two thirds are males. Those in trusted positions commit over 80% of the crimes and most have been with you for more than five years.

If your GP percentage is dropping and you don’t know why, it could be theft.

If you are suspicious and want to check your numbers, speak to your adviser! We can also help with the forensic work to work out how much has gone missing and work with your insurer if you have cover.