Down to Business

The difference between being a leader and a boss is more than simply the word someone uses to describe a supervisor. Employees perceive a leader and a boss in completely different ways, and leaders are far more effective than mere bosses, who often appear stuck in the 1950s, although they may view themselves as progressive. If you’re not sure about your management style, here are three quick questions to help determine how your employees see you — and what you can do keep from falling into the trap of ineffective management.

Do you do more talking or listening?

While no one expects you to be the guru on the mountaintop who gives succinct one word replies to problems, whether you spend more time telling others how to do their jobs or listening to their ideas makes a huge difference in how you are perceived by your employees.  Author and venture capitalist Allen Hall points out that those supervisors who presume to have all the answers are perceived as arrogant by employees. On the other hand, if you spend time listening to your employees, becoming familiar with their ideas and concerns, you will be respected and are likely to experience both personal and professional growth.

Do you tell people what to do or ask them what they can do?

If you have seen the now iconic film “Castaway,” you may remember Tom Hank’s character yelling at his employees to get the job done on a precise schedule. The employees, bored and rolling their eyes, lackadaisically follow suit.

If you’d rather be perceived as a leader than a boss, try letting your employees know what needs to be done and then asking them how they believe the task can best be accomplished. When you allow people to provide input into a process, they are more likely to be personally invested in the outcome. In addition to getting better employee performance, your workers will perceive you as thoughtful rather than dictatorial.

Do you criticize or coach?

While there is always a place for constructive criticism, telling an employee “You spend too much time talking and not enough time researching leads” is not as helpful as working with the person on time-management skills and goal-setting. Criticism sends the message that you are displeased with a person’s work, whereas coaching lets her know that you value her contribution and want to help her to be even more effective.

Most business managers and owners are well aware of the threat of loss from outsiders, and use a variety of methods to reduce this risk.  From locks on the doors, to security guards and dogs, to complex electronic burglar alarm systems, many preventative steps are taken.

However, it is often the case that less attention is dedicated to reducing the risk of theft by an insider. No one wants to believe that an employee will purposely defraud the company of money. Most people want to trust their employees, and rightly so.  But it only takes one bad apple to do significant damage.  Depending on the person’s position within the company, and the length of time the theft continues, substantial losses can result.  Business owners often have a tendency to believe “it can’t happen here.” Unfortunately, employee fraud is quite common.  Furthermore, no risk reduction measures can be guaranteed to keep it from ever happening or detect every instance.

Having said that, loss control experts recommend two general approaches to reducing vulnerability to theft by insiders:  measures to decrease the probability that employees will commit the crime, and measures to increase the perceived probability of discovery and punishment.

Below are seven tips to help with both approaches:

• Institute an anti-fraud policy.  Many employers wrongly assume they don’t need to discuss insider theft, since their employees know it is wrong.  But experts say a strong, written anti-fraud policy, published in the employee handbook and/or posted on employee bulletin boards, helps prevent insider theft.  The written policy reinforces the employer’s intent to maintain an honest, ethical environment, as opposed to one where it is regarded as common practice to steal from the employer.
• Ask employees to report suspected fraud, and provide guidelines for reporting fraud.  Employees need to understand how to report any suspicion of fraud or theft.  Honest employees will usually report fraud when there is a good policy for doing so.  They are more likely to say nothing, if they are not sure how to report the suspicious behavior of a co-worker.
• Maintain a business climate of loyalty and trust.  Expectations influence behavior.  When you expect employees to steal, some are more likely to do so, reasoning that there is no point in behaving honestly if you are already suspected of being dishonest.  Maintaining an atmosphere in which employees feel trusted and valued and are rewarded for loyalty helps prevent insider theft.
• Encourage ethical business practices.  The typical employee thief is often a first-time offender who rationalizes his or her behavior to avoid having to face up to their criminality.  Employees who have a weak moral character are more likely to act on it in an environment where they see the business engaging in unethical practices.  When the company promotes and rewards ethical business practices, the risk of insider theft goes down.
• Compartmentalize job functions.  When the same person both approves and pays invoices, it is especially easy for a dishonest employee to submit bogus invoices and then pay them.  Compartmentalizing duties helps to prevent this type of scheme.
• Ask your accountants to look for red flags that could indicate fraud.  Among the methods accountants often recommend are accounting controls, built-in detection mechanisms, and reconciliation of records.  Businesses increase the probability of discovery with frequent audits that include steps to uncover fraud. Make sure that accountants understand that you view the discovery of insider theft as an aspect of their duties and services.  Utilize your accountants to survey either all employees or randomly chosen employees from time to time, asking whether they are aware of any misappropriation of company money, property, or resources.
• Look into any tips about employee fraud.  Many dishonest employees are first brought to their employer’s attention as a result of a tip from an unhappy spouse or significant other.  These tips should be investigated objectively.  Sometimes employers ignore such tips, because they trust the employee in question, only to find out later that the tip was accurate.  In such cases, the amount of the theft could have been lessened by taking the initial tip seriously.

In summary, to reduce the risk of insider theft, the employer’s position should be one of trusting employees in general not to steal, while at the same time being proactive about measures to help keep workers honest.  Most employees will never engage in schemes to defraud, but unfortunately, there are always some who will.  The dishonest employees are often the very people the employer would be least likely to suspect.

Whether you’re a small business, medium-sized organization or non-profit group, one thing is for certain: there are numerous fraudsters—both online and off—who would be happy to relieve you of your money. Fraud directed towards small businesses is so common, in fact, that the Federal Trade Commission (FTC) has produced a free booklet (available for order here) outlining the most common tactics. The following scams are included.

Directory Listing Scams

If you receive a phone call from a business to “verify” or “confirm” your company’s information for listing in a business directory, you may be experiencing one of the most common scams. Fall for it—and provide the information the caller requests—and you’re then likely to receive invoices for listings in directories that don’t even exist. If the employee who pays your bills doesn’t realize the invoices are fraudulent, he/she may simply cut a check. You’re then out hundreds of dollars.

In some cases, when small businesses refused to pay these phony bills, the fraudsters proceeded to send fake collection notices and make threatening calls about late fees and penalties. They may eventually offer to “cancel” the listing—sometimes for a fee—but will then send more bogus invoices from a different company name. They may even sell your company information to other scam artists who will do the same.

Unsolicited Supplies Scams

If you’re running a business, you need office supplies. However, unless you have a formal ordering process in place, your employees may not always be able to confirm what they should be receiving. Some scammers take advantage of this by sending boxes of unordered merchandise to small businesses. They may even send empty boxes and then call to “verify” the delivery. If one of your unsuspecting workers acknowledges the receipt, you’ll then receive invoices and demands for payment.

URL Scams

These days, many consumers make purchases—or at least research their options—online. As such, your website is a vital marketing tool, and you don’t want to lose it. Scammers know this, and some will call your office (or send emails) claiming that your web address registration is set to expire if you don’t make an immediate renewal payment. If the employee who pays your bills doesn’t realize this is a fraud, you could be out hundreds of dollars once again.

Charity Scams

Consumers like businesses that care about their communities. Again, scammers are all too ready to take advantage of this. They make fraudulent calls claiming to be with local fire fighters, veteran’s organizations, police departments or schools and ask whoever answers the phone to make a donation or buy space in a charity publication. They then take the money and disappear.

Fortunately, there are steps you can take to help your business avoid these and other common scams. These include training your staff to verify everything before writing checks or giving out credit card account numbers, implementing a formal purchase ordering system, inspecting all invoices received, and reporting fraud attempts to the FTC. You can do the latter at ftc.gov/complaint.

 

Seasonal and temporary workers have always been common in industries such as manufacturing, construction, landscaping and retail. However, since the recession, more employers—including those who traditionally employed permanent professionals—have turned to temps and contract workers to satisfy their staffing needs. In fact, by 2020, more than 40% of the US workforce will be free-lancing, according to a recent study conducted by software company Intuit. That’s more than 60 million people.

Temporary and seasonal workers are certainly cost effective. Hiring temps is often cheaper than hiring permanent employees with benefits—especially if you expect to use their services for six months or less. If you choose to work with a temp agency, you are relieved of much of the burden associated with maintaining an employee, from recruiting and hiring to payroll expenses and benefit paperwork. However, you must still abide by the laws and regulations that govern the use of seasonal and temporary workers.

Discrimination and Disability – Equal employment opportunity laws, such as Title VII of the Civil Rights Act of 1964 and the Americans with Disabilities Act, apply to temporary and seasonal employees, whether you’ve hired them yourself or through an agency. These professionals receive the same protection against discrimination, harassment and retaliation as do permanent employees.

Unionization, Wages and Safety – Additionally, the provisions of the National Labor Relations Act, the Fair Labor Standards Act and the Occupational Safety and Health Act also apply to temporary and seasonal employees. You may not prohibit your temps from joining a union. You must pay them at least the minimum wage required by law. And you must provide them with a safe workplace.

Unemployment – Laws vary by state, so consult your state department of labor or your legal advisor to determine your responsibilities. Certain “seasonal employers” may be exempt from unemployment benefit obligations.

Social Security and Medicare – Unless you are using a temporary or seasonal worker acquired through an agency (and they are handling the payroll for that worker), you must withhold Social Security and Medicare taxes from the worker’s wages and pay the required matching amount yourself.

State and Federal Taxes – Again, unless a staffing agency is handling payroll for your seasonal and temporary workers, you must withhold appropriate state and federal income taxes from their pay.

Workers’ Compensation – The law requires all businesses with employees—temporary or otherwise—to carry worker’s compensation insurance. This insurance covers the medical and rehabilitation costs—plus some lost wages—of your workers should they become injured on the job. If you’ve hired your temporary or seasonal workers through a staffing firm, the contract should specify who pays for workers’ compensation insurance. If you are responsible for this and fail to do so, an injured temporary worker could sue your company for negligence.

Whether you regularly rely on temporary and seasonal workers or are thinking about adding to your staff with this type of employee in the future, consult your insurance representative about your state’s workers’ compensation insurance requirements and other legal considerations.

Facebook, Instagram, Pinterest, Twitter—you may already use these social media websites in your personal life to connect with friends, share photos with family, and follow the exploits of celebrities and politicians. But are you using them in your business? If not, you may be missing out.

According to a Nielsen survey, 46 percent of online consumers use social media when making purchase decisions. And a DigitalSherpa survey found that 63 percent of consumers prefer businesses with information that can be easily accessed on social media.

While you should create a business profile on every social media network, actively engaging with consumers through multiple sites is naturally time consuming. Instead, use the information below to determine where to focus your efforts.

Facebook

This popular social network has 1.35 billion active users every month worldwide. While the Facebook user base is dominated by those over the age of 25, it still has over 50 million who are younger. The gender breakdown of Facebook’s users is roughly 53 percent female and 47 percent male. It’s an excellent platform for businesses interested in building a community of customers and potential customers online.

Twitter

This social network is not as big as Facebook, but Twitter still has 284 million monthly active users. Its demographics skew young, affluent and predominantly male. Twitter can work well whether you want to connect with other businesses (B2B) or consumers (B2C), and it attracts plenty of mobile users. If you want to engage people directly—while communicating breaking news, product updates or soliciting questions and opinions—Twitter may be for you.

LinkedIn

LinkedIn is the premier social media career networking site. It’s also the most popular social media platform among 50- to 64-year-olds, though most of its users fall into the 30- to 49-year old age group. Overall, 22 percent of Internet users over the age of 18 have used LinkedIn. If you want to use social media in your recruiting and hiring efforts, LinkedIn may be your best option.

Pinterest

Pinterest is a content-sharing service that allows members to pin or post photos, videos, and other images to their pinboards. It’s a fantastic social media platform for businesses that provide a product or service that lends itself to visual communication (think restaurants, hotels, hair salons, doggie daycare centers, clothing retailers, wedding planners, photographers, etc.). The site has 70 million users, and 80 percent of them are women. According to one Pinterest survey, 52 percent of the social media platform’s users look to Pinterest before they make a purchasing decision.

Instagram

Like Pinterest, Instagram is also best suited to businesses that can communicate visually. Twenty-six percent of online adults use Instagram, with 53 percent of 18- to 29-year olds online now using the service. In fact, 90 percent of the 150 million Instagram users are under the age of 35. Sixty-eight percent of its users are female. According to Business Insider, Ben & Jerry’s Ice Cream was able to reach 9.8 million people in the U.S. in eight days using Instagram.

Do you believe everything you hear about insurance when talking to fellow business owners? If so, you’ve probably been privy to—and maybe even regard as true—a few small business insurance misconceptions. Consider the following common mistaken beliefs to avoid.

Insurance companies never pay on claims.

While a common belief—everyone’s friend of a friend allegedly knows someone whose insurance company failed to pay up—it’s patently untrue. Your small business insurance policy is a contract. If that contract specifies certain types of damages caused by certain types of situations are covered, the insurer has to honor its obligations. Don’t let this misconception prevent you from investing in the insurance your small business needs.

Only big businesses need insurance.

If big companies were the only ones facing lawsuits, dealing with data breaches, or incurring damages in floods and fires, the belief might be true. But it’s not. According to Forbes, 71 percent of cyber-attacks are on small businesses. And according to the Federal Emergency Management Agency (FEMA), nearly 40 percent of small businesses affected by natural disasters never reopen. You can bet a tornado or hurricane doesn’t care how many people you employ.

If I’m incorporated, I don’t need business insurance.

While a LLC (or limited liability company structure) can limit your personal liability by legally distinguishing you from your business, it doesn’t eliminate all potential danger. An angry customer or client could still try to bankrupt your company with a lawsuit. Should he or she succeed, you’d be left to start over at square one—unless you have appropriate small business insurance.

Small business insurance is too expensive for my budget.

Sure, every small business insurance policy requires you to pay a premium for coverage. But that expense is minuscule when compared to what you may have to pay out of pocket if a lawsuit or natural disaster strikes. You could lose your livelihood, your company’s savings, even your own personal assets all because you didn’t buy appropriate coverage. Keep in mind, you can bundle policies to reduce your premium costs. Risk management plans can also help you keep premiums low.

My single business insurance policy covers everything.

Chances are good that it does not. No single policy will cover every situation or loss. The only way to ensure full coverage is to purchase multiply policies designed to cover different types of liability (such as property insurance, equipment insurance and business-interruption insurance). Give us a call today to talk about your small business risks and ways to build adequate coverage.

Many small business owners are under the mistaken impression that their business insurance policies will cover them for damages arising from floods. This is not correct. Just like residential flood insurance, commercial flood coverage must be purchased separately, in a dedicated policy.

The consequences of getting hit by a flood without owning commercial flood insurance are frequently devastating: 40 percent of small businesses hit by a flood never reopen their doors. The results are financially catastrophic to owners and sometimes to employees as well, who find themselves unemployed just as their community is affected by a severe flood.

What does commercial flood insurance cover?

Most flood insurance is sold under the auspices of the National Flood Insurance Program (NFIP), which has a standard set of benefits and exclusions. Commercial customers in low or moderate risk areas can choose building and contents coverage or a contents only policy. Those in higher risk areas naturally pay more, and may not have the option to cover contents-only. NFIP generally provides coverage for the following items:

Building Property Coverage

• Damage to the building and foundation.
• Plumbing and electrical system damage.
• HVAC, water heater and furnace damage.
• Built-in appliances such as dishwashers and refrigerators.
• Permanently-installed carpeting (over unfinished floors)
• Permanently-installed book-cases, cabinets and paneling.
• Window blinds
• Detached garages (for up to 10 percent of total building damage).

Personal Property Coverage

• Inventory/Merchandise
• Computers
• Machinery
• Carpets not included in building coverage
• Other business property
• Business interruption. If you are out of business for weeks or even months after a natural disaster, business interruption coverage may be able to provide you and your family an income to live on. You may also want enough business interruption coverage to pay salaries of key employees and keep payments on leased equipment current.
• Avoidable mildew and moisture coverage.
• Cash, currency and stock certificates
• Most automobiles.

What’s not covered? Mandatory insurance requirements

If you own a property that is securing a federally-backed mortgage and you live in an at-risk area, you are probably required to carry flood insurance as part of the terms of the loan. Check your mortgage document for specific language.

Is There Variance Between Carriers?

There is no significant difference between insurance carriers when it comes to National Flood Insurance Program policies. All companies simply resell the standard policies, which are the same for all carriers across the board. There is the potential for differences in underwriting, though the underwriting and pricing scheme is designed to be as standardized as possible, too. There are judgment calls that may crop up – for example, how to value that antique piano in the basement. That can make a difference on the margins, but for the most part there’s no benefit to shopping around for basic coverage. You can get the same policy from the agent you’ve been working with for years.

Are you a renter?

If you rent your business space, rather than own it, your landlord may carry a good deal of insurance on the property itself. But he will not typically carry any protection for your property, nor any improvements or alterations you made to the property. You will need to arrange your own separate coverage for that. That’s what the contents-only option is for.

What does it cost?

Premiums for businesses in lower-risk areas start as low as $567 per year for both building and contents, while contents-only coverage starts at $162 per year. Commercial coverage gives you up to $500,000 of insurance to protect your building and up to $500,000 to protect its contents.

Businesses in higher-risk areas will have to pay somewhat more for a standard policy. Premiums will be calculated based on the following factors:

• Age of building
• Building occupancy
• Number of floors
• The location of contents
• Location in or out of a flood plain or other high-risk area
• The location of the lowest floor in relation to the elevation requirement on the flood map (in newer buildings only). Recent data from Hurricanes Katrina, Irene and now Sandy indicate that older lower-elevation guidelines were inadequate to provide protection from hurricane storm surge.
• The deductible you choose and the amount of building and contents coverage

You can estimate your premiums using this online tool from the National Flood Insurance Program.

How to Buy Flood Insurance

You can usually buy flood insurance through your property and casualty or business insurance agent or carrier. Almost all commercial flood insurance happens under the auspices of the National Flood Insurance Program, which is subsidized to an extent by the federal government.

Actuarially speaking, it is a particularly good deal for those in flood plains and other high-risk areas, because the federal guidelines ensure that premiums for these property owners are lower than what insurers would charge without the federal program.

Depending on your circumstances, the insurance carrier may require you to get a certificate of elevation from a surveyor.

While flood insurance is fairly standardized under just a few forms, there are important underwriting considerations that you will need to go over with your agent. For example, items stored in basements need special underwriting and pricing consideration, as does property in excess of the $500,000 cap.

Changing your deductibles can also have a significant effect on your premium.

Act Now

There is generally a 30 day waiting period before your flood coverage becomes effective. That means you cannot wait until the storm clouds are gathering before purchasing flood coverage. It’s important to act prudently to have coverage in place when the flood event happens.