Unequal holiday bonuses, purchases disguised as client gifts, and when you need to check how much you trust. 

If you are already having trust issues with your business partner – which likely explains why you are reading this article – year-end provides unique opportunities for your business partner to disguise misappropriation.

At the end of the year, small businesses often see an uptick in spending. Holiday presents for clients, bonuses, and whatever expenditures are needed to create deductions that can be used in the current year can be significant. However, this often creates temptation for the owner in charge of the company finances, believing that expenditures are less likely to be noticed this time of year. One 80% owner felt that he was entitled to have the company purchase a $10,000 tennis bracelet for his wife. Of course, that meant the 20%t owner was subsidizing the extravagance.

Had the minority owner been doing the same thing, or had he at least been told, that might have been a different situation. But to disingenuously categorize the jewelry as “client gift” caused an irreparable rift between the owners and led to a business divorce.

Bonuses are also an opportunity for fraud, as some owners will assume that, when they get a $50,000 bonus, the bonuses among the owners are equal. But when there are 50/50 owners and the owner who cuts the checks gets a significantly larger amount, without any discussion, that can also be a major problem.

All-too-often, minority owners do not review the books with any particular frequency, and certainly not in-depth. Why wouldn’t you trust your business partner? If you receive a $50,000 year-end bonus check, wouldn’t you assume your 50/50 partner took the same amount for himself – and not double?

Whatever your political persuasion, the words of Ronald Reagan – “trust, but verify” – should be heeded. As I have written many times here, if you are the trusting type who never checks the books, a non-trustworthy person will take advantage of your trusting ways.

So, this year-end, pay close attention to your company’s finances. If your business partner balks and starts saying things like, “don’t you trust me,” chances are, you shouldn’t.