Tuesday, February 19, 2013

When The Cash Flows Away

The cost of a book is based on things like the cost of paper, the salary of the editor, the royalty to the author, and a litany of other expenses.

The price of a book is set in order to recoup all costs, and then turn a profit.

Employee embezzlement is one of those non-fixed costs that no one anticipates and never gets calculated into the end price. That's how a company that is thought to be doing well suddenly goes under.

At book wholesaler Bertram Books, an employee managed to lift nearly two million British pounds through fraud and deception.

Graham Goble helped himself to Bertram money, beginning some time in 2005.

He had a gambling problem, it's been said, and he started out taking a little, thinking he had a brilliant scheme to boost his salary. After winning a bet, he'd pocket the gain and then repay his employer, and no one would be any the wiser.

But like any gambler, he kept throwing money into the kitty, losing and losing but believing that the next wager would win it all back.

It took Bertram Books until 2011 to really notice, when year-end financial reports seemed a bit skewed. After all, the bean counters had determined how much should be coming in, based on their knowledge of expenses versus income, and the bottom line was not where it should have been.

Bertram was insured against such losses of theft by deception, but not every business carries that sort of policy. If not for the insurance, the missing funds could have sunk the firm, just as if they had priced their books far below cost.

Because in essence, the embezzlement was an added expense that was not calculated.

Mr. Goble is looking at some serious jail time, while Bertram Books will be looking at an uncomfortable uptick in the cost of their insurance coverage.

That, however, is an expense that can be figured into the cost of the product. Unfortunately, such additional expenses do nothing to boost the bottom line when book sales are in decline.

If only another J. K. Rowling would appear, to create blockbuster novels that fly off the shelves of the Bertram Books warehouse...

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