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Small Business Soundboard: What to do if an employee spends company money without approval?

Small business soundboard jan

Small Business Soundboard is a recurring series that curates business, sales, and customer service advice from fellow entrepreneurs on Reddit. We do the digging, so you don’t have to.

Hi folks! I’m in the camp of content marketers that appends ‘Reddit’ to nearly every Google search. I want to read advice from real people, not replicated SEO mumbo-jumbo. So, recently I went to the small business subreddit to find some juicy, real-life issues business owners are facing – and here are the best questions and advice.

What to do if an employee spends company money without approval? 

Reddit user fireawayjohnny found himself in a tough situation after an employee spent $1,500 on bikes for a multi-unit property he owns. Though his supervisor had mentioned getting community bikes for the property, the employee didn’t have explicit permission for the purchases. Plus, the bikes were non-returnable. He asked the small business subreddit community what to do, and here were the best responses. 

1. Create a policy around spending large amounts

User SegheCoiPiedi1777 replied: 

“Explain to him that his decision was not proper and it will impact business. Anything more than that is a waste of time. And that is because this mistake truly is on you. You should have processes and policies in place for decision-making on spending money over certain thresholds.

If you have no spending policy or need for documentation in place, it’s his supervisor’s word against his. For all you know, his supervisor might have ordered him to get the bikes, and this was not this employee’s mistake. Maybe it was the supervisor’s mistake, who is now blaming him?

You need to learn from this mistake and put a policy in place that for any investment amount over $XXX USD, you need a certain seniority to sign off.”

2. Get both sides of the story

Another Reddit user Toolaa suggested asking the employee what really happened: 

“If you have not spoken with this employee yet, I encourage you to ask him to explain why he did what he did. It’s possible that he got more than a simple concept from his supervisor, and actually did feel he was asked to perform this task.

In the past, I have hastily fired employees based solely on the word of their supervisor, only to find out later it was partially caused by something the supervisor did (or didn’t) do. It may come down to him just misunderstanding what the supervisor said. If that’s the case, the policy should govern the outcome. 

If he reports that his supervisor encouraged him to purchase the bikes, try to dig deeper into this angle. I’ve had supervisors make bad decisions, and then throw their staff under the bus. It’s hard to identify that issue the first time it happens but look out for a pattern to emerge. Then be prepared to address a supervisor problem.”

3. See the good in an employee who went above and beyond

Finally, user Selkie_Love answered this: 

“Something to keep in mind – I’d praise his initiative.

Yes, he made a mistake. Yes, it cost a bunch of money.

He also tried to go above and beyond to fix a problem he believed existed. I’d point to that attitude and praise him for it because that attitude will get a lot of things done. Yeah, there will be the occasional screw-up or mistake, and see if you can figure out a way to have controls in place to prevent it, but the underlying ‘go-getter’ attitude is good.”

Where to go after a failed business? 

Next up is Reddit user Sintech14 who was on the verge of shutting down his business after 5 years and had no interest in starting another.

He asked, “Where do you go after a failed business? Business has been my identity for my entire adult life. Now I’m in my 30s, jaded, and in no mood to start another business. I don’t know if I can stomach a low-paid job and live paycheck to paycheck again. How do you overcome a failed business and an urge for a new career?” 

Here are the best answers. 

1. Get a corporate job with your experience

Reddit user paradigm_shift_0K replied: 

“I sold a business years ago and used my experience to get a great job at a major corporation in the same industry.

Polish up your resume to highlight your entrepreneurial and business management skills to get a leadership position in a quality company.”

2. Give it time, then try again 

Another user (whose account has been deleted) answered:

“The saying “time heals all wounds” is valid in this instance. My first real business closed when I was about your age. I had to go to work for someone else for about 15 years before I tried it again. This time it worked and nearly 20 years in, things are great.

The point is that time really does heal all wounds, and if you’re an “own your own business” type of guy, the itch will return eventually after the pain fades.” 

3. If you can’t find a FT job, try consulting

Finally, Reddit user Independent_Cause_36 offered this advice:

“I was in a similar situation after running a small business for 6 years. If you’re at the point where you’re sure it’s time to stop, rip the bandaid off and get it wound down pronto. If you’re able, take some time off to decompress and get a clear mind. Pick up a hobby, volunteer – anything to help you reset. I found this time away allowed me to reflect on my learnings.

Getting a full-time job afterward may not come easily, depending on what you’re looking for. Several recruiters and HR folks I spoke with raised various concerns about hiring “ex-entrepreneurs.” 

I ended up going into consulting after unsuccessfully (but admittedly half-heartedly) looking for a year. While it might not seem like it right now, the skills and experience you’ve gained are likely quite valuable. In time you may even discover the entrepreneur inside is still alive and you do want to take another shot, this time much wiser. Many entrepreneurs stumble through multiple failures before finding success.”

How to deal with an intelligent but unproductive employee? 

Reddit user david8840 posted about this dilemma – a highly paid employee with great ideas, but little motivation to execute them. 

In his own words, he wrote, “He often comes up with good ideas for the business. He has shown that his knowledge of the industry is superior to most of his coworkers. However when it comes time to actually put his ideas into action, weeks and weeks go by with no real progress. He schedules meetings, asks questions, and constantly shares his opinions and suggestions. But when I ask him why the project isn’t even half done yet, all I get are excuses.” 

Here are the best responses.

1. Move him to a better-suited position

User Once_Wise offered this advice: 

“He sounds similar to someone I knew early in my career. He was the co-owner of the company I was working for, one of the most intelligent and knowledgeable people I have ever met. However, once he had solved the problem in his head, and described how to do it, to him it was done. There was little interest in actually making it into a profitable product. And it was his company. 

He was just much more interested in solving problems than in making money. But without him, the company would not have any of the materials or the machines that made it profitable. His innovations were the company. He would talk to customers, get to know their problems, and come up with solutions that were either new processes, new materials, or new machines. But he needed others to turn his innovations into actual marketable products. Sounds like he might just be in the wrong position.

Another user dev-4_life chimed in, “This is a common trait in people with Attention Deficient Disorder. They hyper-focus on solutions or particular ideas, but the execution part always falls flat on its face.” 

2. Find out what’s holding them back from being productive 

One user Kac03032012 said this employee really reminded him of himself early in his career. While he was perceived as having high potential and usually got promoted, he couldn’t follow through on the tactical things needed to complete longer projects. Here’s his suggestion:

“My guidance to you is to sit down with this person and figure out what their insecurities are. They may get nervous running meetings, don’t think their presentations look good, have trouble with spreadsheets, or think they write confusing emails. The point is, there’s something holding them back from truly delivering great results. I’d work to figure out what that is. Checking in daily, or even multiple times a day, will definitely help them build better work habits, and over time you may truly get a rockstar.”

3. Understand his personality type and adjust the workload

Finally, user qla_all_bay shed some wisdom: 

“It’s his personality type. He is a big-picture guy, not a small-details guy. I’m the same way. I can lead the ship, but I can’t do the small tasks that it takes to run it.

Ray Dalio goes into this extensively in his book, Principles. He talks about how one of the reasons his company became so successful is because he identified the various personality types and placed them into the correct teams/roles. He even created a personality test (which you can take for free) for his employees. Each employee would be issued a baseball card with their stats (strengths and weaknesses).

Pair him with someone who is detail-oriented and can do the leg work to get the project done.”

Want to learn more? Stay tuned for the next Small Business Soundboard coming in February 2024.

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