The plague of small business and institutional business embezzlement has even hit our small conservative city.
Shocking headlines... along the line of...
While every case is different, and methods change, there is one common thread to most cases. Trust... overwhelming total trust.
That means allowing a single employee, bookkeeper, accountant or personal assistant to do all financial transactions for you or your business.
A common method is allowing a trusted individual to create fake vendors, suppliers and customers in your accounting software or system. The individual will overbill your company and send a check for the difference between the actual amount and the dummied invoices to one of his/her fake companies. In some cases, excessive refunds are given to customers or fake customers that may be working with your trusted person. This embezzlement can be going on for not only weeks or months, but years. I might mention, this is not limited to an employee, but can be a partner or partners.
As an accounting / payroll software developer helping thousands of clients over the years here's some things I find that owners and managers should do to minimize the risk of theft or embezzlement. Verify what your records show if done by others. Do spot checks and verify for the following...
A local business man that was a victim to many years of theft said in court to his former bookkeeper, "We were bleeding and you still kept it up... we almost bled to death. How could you do that when we trusted you? You were like a family member."
By Ken Stavast
A serial entrepreneur, accounting and payroll software developer, marketer and consultant to small to mid sized business operations. Can be reached at AffordableSolutionsForBusiness.com or BusinessLogicUSA.com or HomeRunmarketing-USA.com on the contact page.
Shocking headlines... along the line of...
- Women steals 2 million dollars from business over 10 years.
- Local business manager pockets more than 1.2 million over several years.
- Project manager at local university rakes in 100K from student fund.
- On the run this former employee is accused of self-profiting over $10,000 from employer.
While every case is different, and methods change, there is one common thread to most cases. Trust... overwhelming total trust.
That means allowing a single employee, bookkeeper, accountant or personal assistant to do all financial transactions for you or your business.
A common method is allowing a trusted individual to create fake vendors, suppliers and customers in your accounting software or system. The individual will overbill your company and send a check for the difference between the actual amount and the dummied invoices to one of his/her fake companies. In some cases, excessive refunds are given to customers or fake customers that may be working with your trusted person. This embezzlement can be going on for not only weeks or months, but years. I might mention, this is not limited to an employee, but can be a partner or partners.
As an accounting / payroll software developer helping thousands of clients over the years here's some things I find that owners and managers should do to minimize the risk of theft or embezzlement. Verify what your records show if done by others. Do spot checks and verify for the following...
- Pull sample deposits, examine the customer name and check the amount and which invoice / statement they match.
- Reconcile your main bank accounts... at the very least, review your monthly bank statements. Look for unusual transactions, large and small.
- Check the mail yourself from time to time, if not all the time. By checking I mean getting it from the post box.
- If you are the owner, sign all checks yourself or the very least require 2 signatures.
- Review your list of venders or suppliers. Watch for new vendors and learn who they are.
- If you see a new vendor and you don't know them, ask questions and or visit their location... are they real?
- Review your list of customers or clients. Do you know them? Are they really customers or fakes that your money may be going to?
- Do spot checks yourself of inventory and or products. Compare to what your records indicate you have or should have.
- Match and verify what you pay for supplies or parts. From time to time, call vendors and verify supplies and parts costs... yourself. You may find differences.
- If you do a lot of business with cash payments, have an audit trail of funds from the time the business gets them until they are deposited, and who handles them.
- Is business good, yet cashflow and or profits are not so great, and its tough to make ends meet? Are your margins off and need focus? Or are you being skimmed by insiders?
- Do some employees who have access to your equipment and supplies use them to do jobs on the side and pocket the income from those jobs?
- Do you use debit or credit cards to pay bills? Does each transaction have a receipt and or paperwork to state what the payment is for?
A local business man that was a victim to many years of theft said in court to his former bookkeeper, "We were bleeding and you still kept it up... we almost bled to death. How could you do that when we trusted you? You were like a family member."
By Ken Stavast
A serial entrepreneur, accounting and payroll software developer, marketer and consultant to small to mid sized business operations. Can be reached at AffordableSolutionsForBusiness.com or BusinessLogicUSA.com or HomeRunmarketing-USA.com on the contact page.