By: Ruth King
This statement was told to me by a business owner who discovered that his bookkeeper was embezzling. He was shocked when he found out.
The sad part is that he told me this was exactly what he was thinking when he sat in my Building Profit and Wealth class while I reviewed procedures to put in place to keep the honest people honest.
The embezzler had become the trusted bookkeeper.
She started working for the company when the books were a mess and the company was hurting financially.
The embezzler cleaned up the books and the company started reviewing financial statements. It got out of trouble.
The embezzler befriended the owner’s wife…they became good friends.
She was trusted and the owner never looked at the bank statement or the reconciliations. Why should he? She was producing on time, and what he thought, accurate financial statements.
,,,until they started having cash flow problems again.
He knew something was wrong and finally started looking at the financial side of his company.
How did she steal money?
When the company switched to direct deposit for paychecks, she had her paycheck through direct deposit and then another one paid to herself. Then, she deleted the one to herself in QuickBooks. Since no one checked her work, no one looked at the bank statement every day, no one looked at the reconciliation reports…she was safe…until she was caught.
What procedures should you put in place?
- Look at your bank statement every day. Know what checks were cleared, what ACH deposits and withdrawals there were, and see if anything looks out of place. This takes less than five minutes and can be done from anywhere an Internet connection exists.
- When you sign checks, look at what you are signing. If something doesn’t seem right, ask for backup.
- never give a bookkeeper check signing authority. You have given her free reign to write any check she wants…even to herself.
- Review all bank reconciliations. Look at the reconciliation reports. Make sure they match what the accounting software shows.
- Get a weekly cash flow report. It takes your bookkeeper less than 15 minutes a month to do this (email email@example.com if you’d like a sample copy).
- Review and analyze your financial statements each month – it takes less than 30 minutes to review and chart the trends.
Remember, the job of an embezzler is to become the trusted bookkeeper. Never, ever totally trust a bookkeeper!