What if my auditor missed some
fraudulent payments?
"We have regular audits, but somehow a couple of fake commission
checks slipped past my accounting people. The auditors say it's
not their fault, because they only 'spot-check' our accounts. Do
I have any recourse?"
Mike: Auditors never claim to verify every single
transaction your company handles. The cost would be astronomical,
and even then a clever thief could probably find a loophole in your
system that the most thorough auditors might miss.
Rather, auditors test a (supposedly) representative sample of transactions
to make sure your internal records match up with actual payments
and receipts. They pay particular attention to the systems you have
in place to prevent fraud. For instance, does a senior sales executive
sign off on all commission calculations? Are all commission recipients
genuine employees? Is there a special process for approving extra-large
commission payments? If these safeguards weren't in place, the auditors
should have warned you about your vulnerability. But they're otherwise
not at fault if their spot-checking missed a seemingly routine transaction.
Why does it take so long for a sales rep to become
productive?
"My sales vice president says we'll have to pay new hires
in his department a base salary for upwards of a year before they'll
break even. That seems extreme. Any thoughts on how to shorten
the process?"
Mike:There are a few possibilities. My best guess
is that your sales VP is simply hiring reps who need too much training
on your product offerings and perhaps on basic selling techniques.
If that's the case, you might suggest that he start hiring sales
reps with more experience, even if that means he pays a larger draw
up front. In addition, he should look for ways to start new reps
on simpler deals--perhaps re-orders or follow-ups with older customers--that
don't require much product knowledge. Waiting a year to see if a
sales rep is worth keeping is asking for trouble.
However, there's another factor that might be affecting his numbers:
the length of your typical sales cycle. There are a lot of situations
where it can take at least a year to close a deal, either because
of budget cycles or the complexity of the deal. Even the most talented
sales rep will have a hard time earning commissions up front when
the pipeline takes so long to clear. Paying a sales rep a draw for
a year or more is just the price you pay for landing those big deals.
Can I buy insurance against surprise business risks?
"One of my board members points out that many companies
these days are getting nailed by obscure regulations, bogus sexual
harassment suits, international trade violations, and the like.
We run an ethical business, but that doesn't seem to matter. Is
there any kind of insurance we can buy to protect ourselves? Or
maybe a risk audit that will help identify where we're vulnerable?"
Mike: Yes, you can insure yourself against all
kinds of business risks, not just traditional disasters. For instance,
you can get employment practices liability insurance that provides
coverage against suits brought by employees claiming wrongful termination,
discrimination, and sexual harassment. Many boards are now suggesting
this kind of coverage to their companies, as the coverage can be
extended to the board.
Another risk that has popped up lately is terrorism. Overseas supply
chains are particularly exposed to tampering, particularly when you
import products or components that are delivered in large shipping
containers. Here, Homeland Security has set up a voluntary certification
program called C-TPAT (Customs-Trade Partnership Against Terrorism)
that many larger companies now use to manage the security of their
supply chains.
Unfortunately, there isn't a standard list of risks that impact
all companies, so you'll have to come up with a list of your own
vulnerabilities--and then find advisors who know what resources are
available in those particular areas. It can be a lot of work, but
you'll sleep better once you've covered the high-priority dangers.
How do I close down my corporation?
"I'm planning to close my corporation and just operate
as a sole proprietor. How do I transfer the corporate assets--especially
bank accounts--to myself?"
Mike: First, your board of directors will have
to officially approve that change. Then you'll have to file notices
of dissolution or liquidation with the IRS and your state. This process
is simple, except that you have to file your year-end tax returns
after the dissolution, which means you'll need to prepay your accountant
for that work prior to closing the bank account.
Upon dissolution you'll be free to close your corporate bank accounts
and distribute the assets to the shareholders. This transfer is taxable
to you if the value distributed exceeds your basis in the stock,
so you should make sure you can defend any valuation you put on the
assets.
Finally, remember to alert all the people you have contracts with
(such as your insurance agent, leasing company, and credit card processors),
customers who might have sent wire transfers to your old bank, and
creditors who either send electronic invoices or make automatic withdrawals
from your account.
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