bookkeeper image calculator and paper

Is Your Bookkeeper Stealing?

You would think it would be easy to tell that your bookkeeper is stealing from your company.  Unfortunately, life is not that straightforward.

Even if your employee has been with you for years, it is possible that they may be robbing your business without your knowledge. The fact is, good people can do bad things, even when it comes to small business bookkeeping. Sometimes, life throws a trusted employee wicked curve balls; big life events, such as a spouse losing a job, or when couples divorce. It might be the death of a child or parent that sends them into a depression, or a financial crunch caused by poor decisions, like having a mortgage they can’t handle, or college. Or, perhaps a formerly happy employee feels cheated due to a lack of promotion, disagreeable coworkers, or some other ongoing issue.

Many employers begin to suspect something is wrong when they realize that, in spite of business seemingly experiencing an upswing, cash flow is low. If customer payments are not lagging, it may be time to open the books and have an inspection. In fact, it may be time to hire an accountant for an independent assessment.

Controls Help

To fend off the ability to be tempted, it is critically important to have some internal controls built into your accounting systems.  This is especially true for small businesses with only a few employees. No employee should have unfettered access to your banking, for example. Create limitations. For example, only you should sign checks. On a monthly basis, review deposits against the accounts receivables to ensure things match. Check your accounts for irregularities periodically. Look for vendor payments that don’t seem familiar; in particular, companies that have reoccurring payments. Do different vendors have the same addresses or phone numbers? Check payroll numbers, too. If you are using a payroll service, is the bookkeeper’s paycheck correct? Do you ever inspect the payroll? Are there extra payments during the year under their name or social?

Other internal controls include things like separating tasks related to bookkeeping. Cash handling, in particular, requires specific controls.  Processing is another. For example, if one person keystrokes the bills into the system, perhaps a different person can be recruited to draft checks. There again, the person who drafts checks should not be the person who handles bank deposits. In addition, it may be wise to have one employee create new vendor accounts with the proviso that a second set of eyes must approve the account before it is active. Perhaps all bills require a signature of approval before being processed. The point is to create restrictions and checkpoints to make fraud more difficult—and easier to spot.

If you use QuickBooks, there are controls that can be set up to limit access to certain activities. You can check the Intuit site for more information here.  If you need assistance or advice on setting up these restrictions, please feel free to contact our office for help.

Employees who want all the controls are suspect. If your bookkeeper never takes a vacation, be curious. Mandate it. Then, poke around for irregularities, like deposit slips in the drawer. Or customer payments  logged on deposit slips, but somehow not reflected on their accounts.

Outsourcing your bookkeeping needs is another way to prevent fraud from taking place. With your chart of accounts in the hands of an outside party, you can be assured that controls are built in to prevent fraud.

As always, your ZMC & Associates professional is ready to assist you to improve your accounting and bookkeeping systems to be more secure and accurate.