Stop Putting Cash In Your Pocket—Here’s Why

If you are involved in a large company, go read the sports section about my NY Mets. If you are in a company under about one million in sales, this blog is meant for you. Every single one of you has had the opportunity to put cash in your pocket after a job. I doubt there is an exception to this rule. We all complain about taxes, overhead and regulation. Putting a couple of hundred away to take the family out to dinner sure does feel good.

Except for when it doesn’t. You have been consistent with this cash pull-out all your years in business and never had an audit. There have been no wild swings beyond what the economy throws at all of us.  So why not; everyone else does it.

Because someone at your company knows it.  If your bookkeeper has work orders to enter and each week you tell her to throw a couple in the trash, she knows.  The customer who pays you cash occasionally knows when he doesn’t see certain work order numbers or amounts on his monthly statement.  Your foreman knows when certain customers give him a sealed envelope to give to you and you ask him for the job paperwork.

Your front desk clerk knows.  And if she is not smart enough to have figured this out, she is not smart enough to work for you.

Why does it matter that all these people know?  Because if they see you taking cash, they assume that they can take from you too.  Many do.  At some time or another one of these people is going to get into a rub with their own taxes.  And when the tax man visits they offer, “If you’ll let me off the hook, I will give you testimony about a bigger fish.”  I hope you have a life jacket ready as you are about to be thrown overboard.

None of the above happens, but suddenly one day, you call Paul’s consulting and ask me to help you sell your business.  We go through lots of things and find out you show very little income from operations.  You tell me that, of course, you make more than this really shows.  It is now that the potential buyer walks away as they want to see proof of the money the business is making.  All you can say is, “Trust me!” the weekly cash is there.  So they are supposed to trust a man who is breaking the law in running this business and they are supposed to buy your business with numbers that can’t be proven.  I sure hope you have a Plan B at this point.

And really, it is just plain wrong.