After many years in business, something is wrong with you and your business partner

Something does not seem right.

In fact” you smell a rat”!

A business partnership like any relationship needs constant attention and monitoring.

Have there been things lately between you and your business partner that doesn’t seem right?

Are you on the same bus or heading in different directions. Is there a lack of money in the business or are things going wrong?

While over the years I have seen many successful businesses and business partners, I have also seen lots of disputes. Some are trivial, others have involved fraud. Many could have been circumvented at their early stages of the rot settling in if the person had commenced to investigate and talk to their business partner.

It might start as an innocent one-off incident, but it also might be the sign that something is going amiss. Here are few rough things you should look at to avoid a dispute or fraud taking place in your business, with an employee or your business partner:

  • If your note an unexplained drop in your business revenue or profits – Monitor monthly income and costs and set budgets. Make each business partner accountable for business performance.
  • If your business partner avoids conflict with you, fobs your questions off or treats you with disrespect, it is time to check as they may be hiding a more significant problem
  • Where your business partner employs family to administer the books, be sure that you know that the related party person is sharing information with you and not just your business partner. Are they qualified to do the job or was it just give the family member a job! If they avoid giving you information or refuse to answer your questions its time to bring in the external advisers.
  • If there are complaints from customers about changes in orders, service or errors in invoicing, this also may be a sign something is not right. Check why? Are there honest mistakes or something going on leading to fraud activity by staff or a business partner.
  • Watch for unexplained costs and losses on jobs. These could be from overrunning of materials through to excessive travel claims all an indication things are not right.
  • If your business partner changes their routine and starts working late on weekends or does not take holidays or leaves early, this may be a sign that things are not right. It could be personal and lead to underperformance or it could be a sign that their efforts are elsewhere or taking business away from the main show. Are they working on your business or something else? If they are is secretive about what do outside of work then you too have a right to be suspicious.
  • When you note changes in essential items on the business balance sheet where money can go missing such as

–       Receivables not being cleared

–       Bills not being paid

–       ATO and super not being paid

  • If your business partner’s spending habits changes, check that it is not due to them getting extra from the business ahead of you. You do need to be careful about their privacy so tread carefully.

You should know about your business partner on level and have a high level of understanding of what makes them tick. When a business partner has a problem, it impacts on the business. Common issues such as drinking gambling or matrimonial problems can all impact on both your business partners performance and the potential need to dip into the piggy bank.

The signs will become visible. By doing your checks, regular meetings with your business partner and making each other accountable limits things that can go wrong.

Talking to them before it is too late can help. A good open relationship builds a great business. Business partners need to talk about critical items in the business from planning through to exit and succession planning of the business owners. A robust discussion is healthy and needed. However, the worst thing you could do is miss read the signs and ruin a great relationship. Talk to your adviser if you are unsure of how to tackle the problem or need help making sure there are no rats in the cupboard.

Remember if If you smell a rat, then you probably think that something is up. If something does not stack up or feel quite right to you, then you will be smelling a rat.


About Geoff Gartly

Geoff has been assisting businesses with their taxation and business affairs for many years. His practical advice has assisted his clients to grow their businesses and plan their financial future. To contact Geoff please call 039597 9966