How does human resources fit into the business of operations

Strict fiduciary practices ensure that proper controls are in place to protect your company’s profit centers. Photo: iStock.com/artisteer

Many small businesses start out as solo operations, but successful entrepreneurs must soon hire employees to meet demand as their companies grow.

HR stands for “human resources,” a department within a company that deals with employee-related issues. It’s common in the propane industry to have one or two people who handle HR duties.

HR operations include, but are not limited to, administrative services (payroll), recruitment, job analysis, employee relationship management, compliance, terminations and onboarding.

Most HR practices are in place to support management and staff in their day-to-day business operations and activities. Small businesses that do not need full-fledged HR operations often prefer to outsource the necessary services. Large companies, in which the scope of HR services is vast, support in-house HR operations.

I have sat in the seat of an HR department; I have worked in big businesses with decentralized HR teams; I have consulted to big and small companies. I could tell you a lot of stories, but today I’m going to focus on just one.

Strict fiduciary practices

I want to point out the importance of strict fiduciary practices to ensure that proper controls are in place to protect your company’s profit centers.

I was consulting with a big brokerage firm in Denver and was involved in its business on a full-time contract basis. I worked with the leadership team to complete a SWOT analysis on its independent business segments. (SWOT refers to strengths, weaknesses, opportunities and threats.)

When the project was completed, there was a small team that reviewed the data. It didn’t take us long to figure out that accounting was not as tight and secure as it should have been.

The person in charge of accounting had been with the firm for almost 20 years. The CEO trusted her capabilities and his relationship with her. We hired an external accounting firm to come in and complete an exhaustive audit. It came as no surprise that she had been stealing from the firm for years. It was later discovered that she had developed a gambling addiction that the company had been paying for all along.

How would you feel if this happened in your company? Do you have the controls in place to ensure your money is secure? As you read this, I know you are asking yourself: Could this happen to my business? You can’t imagine that your accountant who has been with you since you started the business might be someone you can’t trust.

I challenge you to print out the SWOT form from my July column and complete the analysis on the areas of opportunity in your company.

Here are just a few control points to keep in mind:

• • Are all expenses approved in advance by those authorized to do so?
  • Is all cash that’s received counted and verified by two employees?
  • Is check-signing authority vested in people at the appropriate high levels in the company who do not have any accounting responsibility?
  • Do the check signers review supporting documentation of expenses and approvals at the time of signing checks?
  • Are bank statements and canceled checks received and reviewed by a person independent of the accounting function?
  • Is a chart of accounts used? If so, does the chart of accounts provide for tracking expenses by activity?You get it. Take the time to review your processes and tighten up where needed. As we all know, money doesn’t grow on trees.

Ask Cathy Wallace of San Isabel Services Propane in Pueblo West, Colorado, about employee-related issues.