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July 9, 2011

How Is Your Business Audit Trail Coming Along?

The I.R.S.

We have so much fear for them.  The minute they contact us we get nervous.  It is automatic.  We hate the idea of having to do an audit.  We hate audits.  We do not even do our own audits.  That is how much we hate them.

An audition is an evaluation.  Singers and dancers do it all of the time.  It is a way for us to examine the ability our business has and how much improvement we can employ in our business model.  An audit is not a negative process.  An audit is a form of audition.  It is an effort to improve the likelihood that our business model will bring more profits home to our own pockets.  That is not a bad thing to fear.  It is a good thing to promote.  I cannot see how that kind of thing can become so much of a thing to fear.  Yet it does.  We have become confused.  Confusion has set in so deeply we cannot see how audits can become something we perform on a regular basis, enthusiastically.  We cannot compute that kind of thinking.  We will rely on taking whatever profits 'happen' and refuse to audit our way into finding more to take home.  We get confused.

Yesterday one of our employees, a really good one, asked me how she can quit taking things so personal.  She wanted to know how some people can move about their daily business and never allow certain things to become so personal.  She said she has a tendency to take things so personal that it sometimes interferes with how she tries to relate well with her supervisors.  I paused for a moment.  First of all, why did she ask me this question?  Second of all, who might she be referring to?  Be careful when someone asks you a question.  Remember this...you are not always required to answer it.  It is not immoral, illegal nor unethical to avoid the answer.  You do not need to give an answer to every question you have been asked.  Learn to pause.  Discipline your self to pause when a question surfaces your way.  It is good leadership.  This time, I paused.

While I was pausing and when it was momentarily silent, as my eyes were looking around as if the answer was somewhere in the air above us, she continued on.  She described more about what was bothering her.  It was a good thing I did not quickly offer the answer that immediately came to my mind.  As she shared more, my first impression would have been way off target.  She was not talking about a supervisor.  She was talking about her mother!  Now I am puzzled.  How did I get into this loop of information flow?  How does whatever her mother did dominate how she should worry about her supervisor?  I am now convinced that I do not need to answer any of these questions.

Leaders become part of some circles of trust and do not even notice when it happens.  I did decide to give her a series of answers.  My first answer was a bit like you might expect from me, it was business-like.  I told her the reason why she takes things so personal is because she is living to close to her dreams.  She is operating each day side-by-side with her short term dreams.  The moment someone says anything that bumps up against those short term desires, it interferes with her daily goals.  When that happens, you have a tendency to take that kind of interference personal.  I told her that she needed a bigger dream.  She looked at me with the 'deer-in-the-headlight' look.  Her face said, "What?"

I raised my arm up and put my hand out as I pointed out into space.  Holding my hand out I said, "If you were to be able to look out into the future about 15 years from now, this moment we are having here right now would not be something you would even come close to being able to remember.  It will have become totally forgotten, fifteen years from now.  It would not matter worth a hick of beans.  You will not remember this conversation."  I kept pointing out into space.  I paused again.  She was still mystified.  Her head was tilted to one side and her eyebrows were frowned, her lip was raised up on one side.  She did not get it.  I tried again.  I pointed back up into space and said, "Fifteen years from now none of this stuff today will have any effect on your daily plans...none of it.  It will be totally irrelevant to the things you will need to be doing on that day, fifteen years forward.  None of this will matter."  I continued, "The reason that is true is because your current dreams are not big enough to take you fifteen years out there so you can prevent these little hiccups from becoming such a big shadow over the little goals you are trying to achieve."  I kept pointing out into space.  Her eyes got as big as baseballs.  Her mouth shifted into the shape of an "oh" sound.  She leaned back and said, "Wow."  I immediately said, "Your dreams are too tiny."  I continued again, "Someone says smack in a fit of conversation and we get turned upside down because they killed our immediate daily dreams.  Your immediate daily dreams do not link together enough to form a series of larger ones that can lead you toward bigger and better things in your life.  So you get overwhelmed with the small miniatures of life."  As I walked away I said, "Get a bigger dream!  Get out of the business of trying to hit your dreams today or tomorrow!"

As I walked away I heard her say, "Wow, I never looked at it that way?"

We get confused.


My business life has had many wonderful days of fear.  Some of them have been with the I.R.S. and not always with great results.  I am not above being afraid of an I.R.S. audit.  I do not do business in a fashion that should become cause for alarm if an I.R.S. auditors were to land unannounced onto my front porch.  However, the extra work required to prepare the materials well enough to survive a tough audit would be uncomfortable to perform.  I do not relish that kind of added work.  In fact, the last I.R.S. audit revealed a couple of filing mistakes on my part, so the I.R.S. sent me a nice refund check for the errors I made.  How can anyone be so afraid of getting new money they never thought was theirs in the first place?  It happens.  I liked it.

I have made cash change with my register employees in the past when they were in the 'break room' away from the store register during a regular work day.  "Does anyone have change for a twenty dollar bill?", I would ask.  Some would offer to make change for me.  I would go make change with every employee on that day, eventually during the later part of that day.  I wanted to see the bills they used to make my change.  I performed that 'audit' during times when my cash register was mysteriously coming up short cash on a regular basis.  They never knew I was conducting an audit.  I would quietly come to work early in the morning on the day of my audits and mark every single bill in the cash register with a red sharpie felt pen, a small dot in the lower left hand corner of the backside of each bill.  I never announced to my employees how my cash registers were suddenly coming up short here and there, on a routine basis.  Audits work better when they are stealth.

I watched who routinely made change with marked bills, exactly the way I had been marking them.  It is amazing how often the same person kept making change with the bills I was marking.  It is amazing how none of the others ever gave me one of those marked bills.  I would perform that routine for a period of time.  "Does anyone have change for a $20, I'll go get us some donuts!"  Be careful, audits can mislead your thoughts, but hey can provide you with some very interesting notions to pay closer attention to as you work your business model through its challenges.  I shifted that employee away from the cash register responsibilities.  My cash drawers balanced every single day afterwards, give or take a penny or two here and there.  What do you think?

That 'suspect' left my employ several months later to go work somewhere else.  Three years later I read about him in the police reports after he and two other people were caught stealing television sets from an apartment complex.  I am not in the police business.  I did not have enough evidence to bring any charges against that person.  My audit only suggested that I make a slight business change to reduce my potential for further losses.  I wanted more money to come to my home.  Audits help you do that stuff.

The best place to audit your business is in your books and your inventory.  You should not need a rough employee to cause you to move on those two areas of check and balance.  You should already have a system in place that is stealth, effective and routine.  If you do not, you are not protecting your business money like you should be protecting it.  Shame on you.  Learn how to audit yourself.  Your business model needs an audit going on, somewhere, at all times.  It may be with your bookkeeper, your accountant, your banker, your checkbook, your employees, your money handlers, your inventory, your system of spreadsheet inaccuracy searches and your own management of your 'petty cash' bad habits.  These areas of responsibilities can rob your business blind.  Do not fear what you my discover.  Make sure you are willing to look into the mirror.

I have worked with business owners who have taken way too much out of their business model cash flow to help it function properly and safely.  They have robbed their own business from its possible success.  I have seen this happen more than I care to admit.  I have also seen it happen to some really smart people.  They are too fixated on the short term goals of their daily lives.  They need to get some bigger dreams.  Their daily habits are quietly stealing their long term success away from becoming something very good.  They are taking today way too personal.

Get a bigger set of dreams.  Develop a healthier trail of audit patterns for your business model.  Then work those dreams into something that helps you learn how to buffer all of the little obstacles that have a tendency to get in the way of interrupting what your business plans want to get done.  Have fun.  Do audits.

Until next time...

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