After working with business owners for more than 30 years, I can almost smell when the books are not right. Unfortunately sometimes it is a bookkeeper stealing, other times it is field employees. Either way, it is a sickening feeling and I HATE telling owners, “Someone is embezzling and here’s the proof”.
All leave tell-tale signs. And sadly, most could have been caught quickly (or bookkeepers would never try to embezzle) by owners doing one simple thing – having their bank statements sent home.
So, if you aren’t getting your bank statements at home, stop reading this article and call your bank. Have your address changed to get your bank statements at home. Look at them! The microfiche’s show signatures, who the checks were written to, and the numerical sequences. If something doesn’t make sense, then start asking questions. This is your first line of defense!
We’ve actually caught vendors changing the amounts on checks before depositing them. A $40 auto repair invoice became $400 when the vendor deposited the check. And, the bank took $400 out of that business owner’s account instead of $40. So, not only do you have to watch your employees, you have to watch your vendors!
If you have a bookkeeper, who supposedly knows what he or she is doing, and your books are a mess, the first question to ask is, “Why?” If a bookkeeper knows what he or she is doing, your books should be clean. They should be readable. If they are a mess, then you may have an embezzler. By keeping the books a mess, the embezzler can easily hide his or her actions. You can’t follow what’s going on in your business so you probably won’t catch the embezzlement.
Want to find out whether your bookkeeper really knows what she is doing? I’ll send you a bookkeeping test (and yes, the answers too!). Email me firstname.lastname@example.org.
If you decide to get an audit, or have someone like me look at your financial procedures and financial statements, then don’t be surprised when the embezzler strongly objects to an outsider reviewing the books. Or, when an outsider does come in, the bookkeeper quits – usually with a flimsy excuse.
Many owners, once they have a bookkeeper, totally abdicate the responsibility for the financial segment of their business. As long as there is enough cash, they think they are ok. Many times they are not.
You can delegate responsibility for the day to day bookkeeping activities. You cannot abdicate the responsibility for reviewing the statements each month. If you take the time (usually less than 30 minutes a month) to review your financial statements, you’ll know if something doesn’t look right or the statements don’t seem right. Start digging and question the entries. Ask for backup to make sure the values are correct. It’s your business. You have a right to see the backup proving the correct amounts for the entries.
Trust your gut. If you feel something is wrong and things don’t make sense, then something probably is wrong. Most times we don’t want to believe that someone is stealing from us. However, unfortunately it happens to hard working business owners all the time.
Put procedures in place to lessen the chances that embezzlement happens to you!