Knowing who you hire for your small business is not only important, it is necessary. Small businesses have very few people on hand, which means that your employees need to be reliable and trusted… especially if the employee will be handling financial or sensitive information.

Most new business owners hire family members or close friends who simply want to help the new business venture grow and save money – but sometimes that is far from the truth.

We spoke with background investigator, Emily McGuigan, who said that “family friends are dangerous because we are more likely to discount potential red flags due to that familial connection/friendship.” She argues that “it is more crucial to conduct a pre-employment check when hiring family friends, than anyone else.” While this may sound harsh at first, she did make a very important point. “Some people compartmentalize different aspects of their lives, so just because you know John Doe from your family BBQ, that doesn’t mean you know him in a professional component.”

This “I know them” bias is what causes most future headaches for small business owners.  When we hire family friends, we immediately trust them with our finances, our children, and often times our life.  As a small business owner you have the responsibility to conduct background checks on all potential employees as part of doing your due-diligence to help your business thrive.

Are small business background checks expensive?

Many small business owners shy away from background checks thinking that they are too expensive or are simply not worth the investment. However, that is simply not the case. A background investigator can provide you with affordable options that start at $100. Even if background checks were expensive, missing a crucial detail on a person’s background can be devastating for a small business and may cost you thousands of dollars in costly litigation damages.

While there are many online alternatives that offer an “instant check” solution, McGuigan suggests that we stay away from them at all costs. While appealing because of the price and quick turnaround time, these types of checks are often times outdated and unreliable. McGuigan said that “if your applicant has a common name, you may not even get their information back, you could get results for anyone who has the same name & resides in the same general area.” The data may give you a false negative/positive and could put your business in jeopardy.

McGuigan finished off by saying that “using online checks is the equivalent of self-diagnosing from web-MD rather than going to the doctor. At times, successful, but more often than not unreliable.”

We want to include that most of these services are not FCRA Compliant (Fair Credit Reporting Act). The FCRA regulates and dictates the way an applicant is to be notified about obtaining a background check or credit report and it allows them to dispute the findings. Here are an employer’s basic responsibilities under the FCRA and how to avoid litigation.

Our very own Executive Assistant, Tobie Beck, added that a background check reduces your liability, protects your business reputation, and helps you gauge the character and honesty of your candidate.

Take the example of a grandmother that was arrested after stealing $70,000 from a Spring day care center where she worked over a four-year period. The owner of the care center said – “I trusted her and when I finally figured out what was really going on, I just felt a great sense of betrayal.”

When an employee steals from your business, the money is often times gone forever. They don’t have the funds to pay it back. A simple background check could prevent this heartache.

The potential costs of not running a background check don’t stop there. If you don’t run a background check on every new employee, employees can file lawsuits – especially if they are not hired due to their records. You cannot pick and choose who you run background checks on – that’s giving preferential treatments to friends or family. Unless you have the funds to go through long litigation procedures, cover your assets.

So, what types of background checks should you run?

Emily McGuigan suggest to run a basic background checks and then proceed foward based on the background results and the recommendation of a seasoned background investigator. A true comprehensive background check will include so much more than criminal histories – they include: Address verification, employment verification, driving records, criminal records, SSN validations, work eligibility, and sometimes financial histories.

With all these different options, it is important for you to know what type of background check makes better sense for your future employee. For example, if you are hiring a new delivery driver, it would be important for you to check their driving records. If you are hiring an accountant, it would be more important for you to check their credit report.

Here is another example of a Santa Ana employee that was arrested on 17 charges in embezzlement of $4.3 million from a city. They missed a crucial element during their background investigation – he was $53 Million in debt prior to coming to work for the company.

Here is a short list of background checks that you can start with:

• Address Verification Checks
• Driving Records
• Criminal Records
• SSN Validation and Work Eligibility
• Sex Offender Status
• Drug Testing
• Education Verification

After you run these checks, if you find a piece of information that requires more attention, you can expand and continue to “dig” deeper into the applicant’s record.

With all of this, are Background Checks for Small Business Necessary?

Absolutely. They are more than necessary – they are a requirement for successful businesses. For a very small cost, you will keep your business safe, protect your staff from violence, and deter employee theft. Background checks can also protect you from costly litigation and crippling expenses in the future.

If you have any questions about small business background checks or pre-employment background investigations, contact our office and we can connect you with a background investigator who can assist you and your needs.