Under your nose

Rob Atema, owner and CEO of Rivertop Contracting in Swannanoa, North Carolina, was blindsided when his office manager stole roughly $250,000 from the company over three years. She wasn’t a new employee either.

“She had worked for me for I think about six years,” Atema says. “Basically, what was happening was the company was growing. Me and (COO Brian Wierman) were concentrating on operations and sales, and our office manager seemed to have everything under control.”

The situation started in 2014 and ended in August 2016. During that time, Atema thought business was doing well. So well the company was the September 2015 cover story for Lawn & Landscape, where Atema discussed how he changed his company’s focus and rebounded from The Great Recession.

While that story of triumph was being told, Rivertop was being robbed. The office manager started off small, simply adding $200 to each of her paychecks. Since she was in charge of payroll, no one noticed. As time went on, Atema says she became more brazen.

“She was bonusing herself regularly,” he says. “Every time she would get paid, she was paying herself two or three times a pay cycle and washing it out.”

Even though others in the company were looking at P&Ls, the office manager would hide it by reporting payments to vendors, then stiffing the vendor money on the check.

“Say she stole $500, she would mark she paid 100 percent, but would leave off $500 and keep it for herself, which would then leave a balance at one of our vendors,” Atema says.

She also opened a company credit card in her name, racking up $35,000 in charges before it was discovered.

Friendly, but not too friendly.

Atema says the office manager was pretty savvy with how she picked the vendors to target. She would choose ones the company had high volume with or that Atema had a personal relationship with.

When the vendors would call him, the conversation would start with chitchat before they mentioned an old invoice. He would then bring it up to his office manager, who always insisted it was paid. “She would call and fix it,” he says. “I don’t know if she went back and paid them and then started again.”

The friendships he had with vendors came in handy because they would give him the benefit of the doubt. Atema says those relationships helped because they understood that he wouldn’t be able to pay right away after discovering the theft.

He adds that if the vendors had sent the due invoices to collections or had told them they had to pay upfront, the company wouldn’t have been able to.

“We were eight months overdue on some invoices,” he says. Some of the invoices reached $100,000.

“Having a relationship with your vendors and being honest and transparent for us in a real-life situation changed the recovery for us. We may not have recovered had our vendors not stood beside us and said, ‘OK that’s a bad deal, what can we do to help you?’”

Data discoveries.

Ultimately, Rivertop’s office manager was caught when the size of theft got so large the company started experiencing a noticeable cash flow problem.

“That was startling to me because the company was doing well. All the P&L sheets said we were doing great, but we had no cash,” Atema says. “Our accounts payable weren’t jiving with receivables.”

Rivertop had a CPA, but when Atema approached her to make sure everything was balanced, she admitted she was 15 months behind in rectifying the company’s books. Luckily, she was able to quickly discover the fraud, pulling enough evidence together that they were able to confront the office manager and fire her.

What happened next is what Atema calls a fire sale. He called in his father’s CFO and had her change all the Rivertop accounts, passwords and anything with sensitive logins that the office manager could still access. They relieved the previous CPA and with the help of his dad’s CFO, Atema hired a whole new office team: a book keeper, office manager and receptionist.

Rivertop ended up posting a loss in 2016 and has had to do a lot of debt consolidation and refinancing to pay back vendors. As of July, Atema says the company has finally started turning the corner and stabilized from the incident.

The aftermath.

The employee pleaded guilty to the crime and received one day in jail, 40 hours of community service, 48 months of probation and had to pay some restitution.

Atema advises other business owners to carefully review their insurance policies. His insurance included employee dishonesty coverage, which he didn’t know existed. The insurance plan Rivertop had didn’t cover enough for the size of the company, but the insurance company did pay Rivertop back a small amount.

In preparing for a similar situation to not occur again, Atema says the company now has a segregation of duties in the office. For example, the person who collects the mail isn’t the person who makes the deposit.

The company also requires checks to be seen by three people before being deposited. The checks require dual signatures, and the CFO is now a signer on the account.

They also implemented more banking restrictions. Now, if there’s a check going through for more than $5,000, someone has to physically make that happen, instead of leaving it up to banking technology. The new CPA meets with Rivertop’s executive team once a month to go through everything that’s on the books for that month. The company has also updated its purchase order system in order to stay on track of orders, purchases and job data.

At the end of the day, Atema sees the situation as a learning moment. In fact, he’s somewhat glad it happened, as funny as it sounds.

“I learned a tremendous lesson that now I feel I’m ready to take our company to the next level,” he says. “I now know what I should have learned a different way, but it’s good to know it now. I feel way more confident now than I’ve ever been.”