It was a conversation Jerry Salter will never forget.
He sat in a local Eau Claire, Wis., restaurant near his shop, Trubilt Collision Center. Across the table was his former parts manager, the parts manager he fired just a couple of weeks prior.
Salter had found all the facts—thousands and thousands of dollars worth of parts had been stolen from his shop over the past several years, all going to this former parts manager for personal use.
There was a paper trail. There was proof. There was even a confession.
What Salter didn’t have was a reason. He wanted to know: Why’d he do it?
He didn’t like the answer he got.
“It was just too easy,” the former employee said.
Salter knew then that his problem ran much deeper than one thieving employee.
“When he said that, I knew we didn’t have enough checks and balances in place,” he says.
THE BACKSTORY
Jerry Salter took over Trubilt in 1997, after working as a service director for a local car dealership for several years. Like many new shop owners, Salter’s plate was full at Trubilt in the early days. He was the business owner, estimate writer and shop manager.
The shop’s previous owner did not use any sort of shop management system. That owner had no idea how much profit he was making on each job. And he had to manually examine each invoice, rather than tracking it through a system.
Overall, it was a time-intensive process to track expenses and profit, which is why Salter simply trusted his employees at their word, instead of going back over the paper trail of their work.
And that’s how his parts manager was left unsupervised in ordering parts for the shop.
Salter said the parts manger appeared to be an impeccable employee and person. He was a long-time staffer with a happy family and a clean reputation. He was the last person Salter thought he needed to question.
“We trusted him more than we should have,” he admits.
THE PROBLEM
Salter’s parts manager had been ordering parts without a purchase order number. That way, he could order a batch of parts and the vendor trusted it was all for a job, but the parts manager didn’t have to prove it. He used some of those parts for work, and some of them for his own personal use.
In 2002, when the parts manager was still employed at the shop, Salter decided to begin using a management system to improve the business. Once the management system was in place, Salter began to see problems he didn’t notice before.
One day, Salter’s office manager put an invoice on his desk. It was for a vehicle that had been hit on one side—not both—and yet his parts manager had ordered a right door and a left door.
The office manager was confused by the order, and so she left it to Salter to figure out.
More and more questionable items were brought to Salter’s attention, each with an excuse from his parts manager, and each building a case against him.
And as the parts manager continued to get questioned, he resorted to other avenues of theft, Salter says. He began ordering parts for jobs that had already been closed out. He would try to claim the customer came back to get more work done, but with Salter taking a closer look at all of his expenses and jobs going through the shop, that behavior didn’t last long.
Salter knew what was going on, and he sat his parts manager down to confront him. He confessed, and Salter fired him.
But that didn’t necessarily solve the bigger issue of protecting his business.
Salter needed to know how to move forward.
That’s when he took his former parts manager out to lunch, and heard those disheartening five words: “It was just too easy.”
THE OPTIONS
At that point, Salter knew that he needed to put better controls in place so that he wouldn’t fall prey to this kind of situation again. But the question still loomed: How could he do that?
He could try to find “better people,” but his trust in an employee was what already burned him.
Mike Henning, president,
Henning Family Business Center
Where is the Employee Manual? What does it have to say about stealing? Does the owner/manager go over these operating principles on a yearly basis? All of this stuff should be common—and expected. The material that goes into a handbook is common knowledge and easy to find, and it can help prevent instances like this. Personally, based upon what I read in this case, I would give the employee a second chance if he would comply with the rules in our newly developed employee handbook. He would need to seek help from a therapist who deals with cases that involve stealing.
Richard White II, managing member,
One Eighty Business Solutions, LLC
I wish Jerry’s story was an abnormality but with the struggling economy and people struggling to make ends meet, fraud is on the rise. Like most other shop owners we speak with, reducing their risk to fraud sadly comes after an incident. There are a few quick, low-cost ways to protect yourself, though: Have bank and credit card statements sent to you at a separate address (your home or a P.O. box, etc.), and check them personally; reconcile all bank and credit card accounts, accounts receivable and vendor statements, looking for red flags; never let an employee represent him or herself as you; use purchase orders; and back up all your data off-site.
“It made me a little colder in regards to trusting people,” Salter says. “To this day I would have trusted (the parts manager) with everything we had.”
So, simply hiring better wasn’t an option.
Salter knew he needed to overhaul his processes and somehow make it impossible for someone to steal—and go unnoticed stealing—ever again.
THE DECISION
Salter began reworking the shop’s systems and practices.
He called all his shop’s vendors and let them know that, from now on, not one part could get ordered through Trubilt without a specific purchase order number attached. He recalls telling them, “If a part comes [to the shop] without a PO, we’re not paying for it.”
He also mandated that each part that gets ordered must also have a name attached to it. That way, someone is held accountable for each order, which deters theft.
Then he bought an insurance policy that helps guard against theft. The insurance policy stipulated that the shop install a security camera system with 16 video cameras surrounding areas inside and outside the building. They also needed to install a key fob system for the entire building, as well as the parts department. Salter can track each person’s entry and the time they enter.
He also installed supply cabinets for each technician. Vendors come in regularly to track inventory for each tech, and then Salter examines the ratio of inventory to sales. For example, if one tech is selling $40,000 of work and using $10,000 in supplies, and another guy has the same sales but is using $20,000 of supplies, then Salter knows where he needs to investigate.
In total, he spent about $25,000 to $35,000 on these changes—money well spent, he says, considering the problems he avoids in the long run.
He also had regular meetings with staff and talked about how to move the shop forward. “Instead of just talking about cars, we talked about things we need to change and look at in the shop,” he says.
THE AFTERMATH
While Salter and his staff talked regularly, it wasn’t always easy, he says.
“It’s a change,” he says. “Some were happy with it … but it was definitely more work.”
While some liked the higher standards and greater efficiencies, there were also a lot of people who resisted the changes. He retained all the employees, but they spoke up about how they didn’t see why one person who stole should have to ruin it for everyone who’s trustworthy, Salter says.
“It was really a struggle,” he says.
Some people also disagreed with the firing of the parts manager, who was friends with everyone at the shop. They thought Salter should have forgiven the mistake and kept him on because he had otherwise been a loyal employee. Salter had to explain to the staff about the problem of breaking trust.
“It’s just weird how people … rationalized [the situation],” he says.
THE TAKEAWAY
Salter says he realized the importance of checks and balances, even when he trusts someone—especially when he trusts someone.
“Those are the ones that usually do it. ... I don’t care if it’s a family member; you have to have checks and balances,” Salter says.
He says that other shop owners need to consider putting into place similar systems to deter theft, unless shop owners are handling all the money themselves and all the parts. If you don’t, he says, “you’re just asking for failure. You’re asking for trouble. And basically you’re giving them the opportunity to do it.”
Salter says he doesn’t like examining every invoice and looking through every piece of mail, but he does it. “It’s a pain in the butt, but it’s part of the gig,” he says. “It’s part of the ownership.”
