Systems, Not Trust, with Family

In Making Money Is Not Illegal, Immoral or Fattening, we warn about the importance of having financial control systems. Art Freedman tells this true tale to show that the rule holds even in families with bonds of trust:
     “A father wants to phase out of his retail business, so he gives his son the responsibility of operations of the floor, including ordering. He says to his daughter, ‘You take care of the back office in the business. You do all the accounting, all the deposits, the human resources.’ Two years pass by, at which point, the son goes to his father to say, ‘Dad, could you put some more money into the business?’ Dad says, ‘What do you mean?’ ‘Well,’ says the son, ‘I’ve some bills to pay, and there’s no money in the account.’ Dad says, ‘I haven’t pumped money into this business for 25 years.’ The son comes back with, ‘I don’t know what to tell you, Dad, but we’ve got bills, and we’ve got no money.’
     “Dad gets excited about it and hires a forensic auditor. They discovered that for the past two years, the daughter has been embezzling money out of the business to the tune of $750,000. A hit to the bottom line of three-quarters of a million dollars.
     “I’m told that when the daughter was interviewed, here’s exactly what she said: ‘Dad, all I was doing was getting my inheritance before you died.’ That’s the way they think. Thieves are going to make excuses, so you must be careful. You must have systems in place that include safeguards, checks, and balances.
     “Dad and his son did not press charges against the thief. She was, after all, a close member of the family. I can only imagine how their next Thanksgiving dinner came off, though.”