Over the years I have spoken to literally hundreds of business owners who have had problems with their bookkeepers. The lucky ones only had incompetent or lazy bookkeepers who only provided financial statements that were so wrong that they were useless as a management decision tool.
The unlucky business owners hired bookkeepers who stole thousands of dollars from them. Most of this theft resulted from the business owner totally trusting them. Why? Well the main reason is that the business owner just hates anything to do with bookkeeping! They would rather be out making a sale and working on producing the product or service so that they can get paid. Who can blame them? But, this trust can go way too far! I have seen business owners let their bookkeepers run the business finances in total. This often includes receiving the money, paying out cash, making deposits, signing checks, using the company & personal credit cards and then relying on them to prepare all the bookkeeping. I know they trust them but do they have to tempt them?
Though some employers are unlucky enough to hire a professional embezzler, most theft starts small as a onetime thing when the bookkeeper has a problem. But, they don’t get caught and they realize how easy it is so it grows. The bookkeepers rationalize it by saying they are running this company and are not being paid what they are worth. So, they deserve the money since they “earned” it!
The employer often thinks their CPA will find it. Wrong! We are hired to do tax returns or financial statements not to perform an audit. Often theft occurs before the cash is ever booked. Most often the theft is payments to cover the bookkeeper’s personal expenses that the CPA has no way of knowing they are not business expenses. There are at least a dozen ways a smart bookkeeper can cover their tracks.
So, what should the business owner be doing?
- The business owner should sign all checks. Before they do, every check that is given to them to sign should have attached all relevant backup data so the owner knows what is being paid and who ordered it.
- The business owner should make the daily deposit and compare it to the daily cash receipts report. (If you don’t have one you better call your CPA for help in designing one!)
- The business owner must control all access to company & personal credit and debit cards. Be sure not to share passwords!
- The Owner must get the bank statements and open them personally. Better yet, they should review the bank credit card activity on line daily or at least weekly.
- The owner should reconcile their bank monthly. If not them, they should hire someone else like their CPA to reconcile their bank accounts. Just be sure it is not the bookkeeper.
Remember, the job of a good professional embezzler is to become the trusted bookkeeper! Never ever totally trust your bookkeeper.
Thank you for your continued support and let’s make this year our most profitable year ever!
P.S. If you don't believe me, google embezzlement and bookkeeper.