Risk #4:
Dishonest Employees Bleed You Dry
You hire wisely. You check references. You work alongside your employees and build trust. Then one day you discover that one of them has been taking kickbacks from the landscaping company that services your properties, or perhaps you find that an employee set up a second bank account and has been depositing some of the checks there that are paid to your business. There are all kinds of thieves in the world. For some reason, probably because money is always changing hands, real estate is a business that seems to breed dishonesty. But there are ways to protect yourself:
• Sign all checks personally. This can be hard to do as your business grows, but it remains the most effective way to know just where your money is going.
• Hire an accounting firm to audit your books on a quarterly basis. Look for a company that has an aggressive attitude and stance. When employees know that every penny is being watched, they are less likely to have the small lapses in honesty that can add up and cost you a lot of money in the long and short term.
• Talk to employees about what is appropriate behavior and what is not. Explain that if a paving company wants to fly them to Acapulco for a week to “thank” them for awarding a contract that can land your company and you in trouble. Encourage the people who work for you to come to you and tell you when vendors make offers of favors or gifts. Reward them when they do.
• Scour your books for numbers that don’t make sense. Last year your firm paid $12,500 to electricians. This year, that figure doubled. Last year, your rental income for a particular building was $12,000 more than it was this year, and nothing has changed as far as you know. There might be perfectly good reasons for these changes, but there might not be. It takes an eagle-eyed business owner to zero in on all statistics that are out of line and find out the reason. But eagle-eyed business owners stay in business while others fall by the wayside. If you are genuinely interested in building a fortune in real estate, it is worth the effort.
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