More businesses and non-profits have become victims of theft by their internal bookkeeper. There are some simple things a business owner can do to prevent potential theft.
Tell the bookkeeper part of your company’s internal control includes your review of financial reports.
How do these thefts happen?
Today’s world of bookkeeping software – bookkeeper can write a check in their own name, then enter the transaction as a reimbursement for a common expense category like office supplies or fuel. The amounts of theft are small transactions but when done repeatedly the dollars multiply significantly.
Another technique – using the company credit card. They could put their fuel on the card or order something personal. When the owner sees a check for a credit card it is usually one lump sum that pays the monthly charges.
Another instance of theft involves using the company’s cell phone provider to add other users to a calling plan or upgrading the features of a plan that benefit the bookkeeper, but checks are simply written out for the higher costs and there are no red flags for the owner when accounting reports are read.
Another area is adding hours to the bookkeeper’s paycheck. Who is going to notice three more hours on a paycheck? The owner sees the net check and as long as it looks “normal” no one is the wiser?
So what do you need to do to protect your business from embezzlement?
- Sign your company’s checks. Thefts can occur when your bookkeeper has a stamp or signature authority.
- Look over charges on your credit card statements and cell phone bills before cutting the checks. Are there any charges to vendors you don’t recognize?
- Do your own audit. Print a month’s activity in office supplies and have the bookkeeper pull the invoices to back up each check.
- Have bank statements sent to your home. Review cancelled checks without office distractions.
- If you’re not signing all checks, have two people sign. It is less likely two people will agree steal from you.
- Review the payroll several hours before the payroll is processed.
Do the math: If $5,000.00 is stolen you need to increase sales by $15,000 to $20,000 just to break even from the loss. A dishonest bookkeeper is stealing PROFITS!!!!
By David Rumsey, owner of Pettis Rumsey Inc., accounting firm David@pettisrumseycpa.com
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