How do I stop our CEO using the company as a personal piggy bank?

Dear Aunty B,

I am the general manager of an SME that has been severely affected by the GFC, losing several major clients through receiverships in a sector of the market that has seen significant downturn.

We have worked hard to establish new clients, creating income and business streams that should ensure our survival for the next 24 months. As a consequence cashflow has been an issue and from time to time we lurch from one monetary crisis to another.

Our CEO is also the owner of the business. When things were good he used the business like his own piggy bank, taking drawings whenever he needed to pay personal expenses, mortgages and the like. Times are tough and today we simply do not have the cashflow to allow this behaviour. I acknowledge that it is his company and he is entitled to draw – however surely this should be in the form of a salary and limited. How do I broach this subject and get him to understand that if he continues to use the business as a piggy bank we will become insolvent and all loose our jobs?!

Fed up

Dear Fed up,

Well, your boss is lucky to have you. But what he has to be made to understand is that the company’s funds are not his funds. If he is taking funds from the company and using that for personal expenses then he is not paying the personal tax rate on those funds. And that can land him in all sorts of trouble with the taxman.

Tell him that an audit is on the way and that they will be reviewing the owner’s access to the piggy bank. There is a big crack down on owner’s use of hidden loans and drawings and it is quite possible you could be notified any day about a “friendly visit’ from the tax office.

Get your accountant on board to spell out to him that not only will the company become insolvent but he will also be in big strife if he keeps acting this way.

Work with your accountant to restructure what he takes from the company. He might need a higher salary and better dividend plan that then means he keeps his hands off the company’s funds.

Yes, it is his company. But it is not his personal bank. There is a huge difference.

And to you, my friend, let me say this. You deserve better. It is galling as a GM to see funds pulled out of the business when things are so precarious.

You should be able to tell him this – and describe what a strain it is on the business, you and loyal staff.

Paint a new picture for him – one where he will ultimately get more if he has the discipline and good sense to build a sustainable business.

He will also not end up on the bad side of the taxman, a place he certainly does not want to be.

Good luck,
Your Aunty B

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