Perhaps nothing hurts a small-business owner more than learning they've been defrauded by a trusted employee. Let's take a closer look at a recent case in which a bookkeeper embezzled $600,000 from a pair of Chicago restaurants and see what business owners can learn about safeguarding their finances.
Never Let One Person Handle the Bills
This is one of those lessons that seem obvious in hindsight. In the Chicago case, the bookkeeper was responsible both for cutting all checks to the restaurants' vendors, with no oversight, and for performing reconciliations. Over a six-year period, she wrote herself $604,113 worth of checks from the company account, then cut checks with the same numbers for the vendors. The restaurant owners didn't discover the scheme until a company accountant was setting up a new bookkeeping system and noticed the discrepancies.
The guilty party had been with the company for almost 20 years. But she found herself "in over her head" with credit card bills and other debts and yielded to temptation, according to the Chicago Sun Times. The paper also reported that "on her way out of the office, she offered some advice: 'Make sure the next bookkeeper you hire doesn't do the bank reconciliations as well,' the complaint states."
We couldn't have said it better ourselves.
Move Your Bookkeeping to the Cloud
In the Chicago case, the fraud was possible in part because the company used paper checks, which allowed the bookkeeper to delete the checks she wrote to herself from the company account and replace them with vendor checks for the same amount. An online accounting system featuring electronic funds transfer (EFT), which offers heightened scrutiny and security, would have prevented the bookkeeper from even attempting such a scheme.
A second set of eyes would also have been an effective deterrent. That's why outsourced bookkeeping services can be an excellent option for many small-business owners who don't have the time or experience to oversee the books themselves. Outsourced bookkeeping services are also scalable, so they can grow at the same rate as your business.Whatever path you choose, make sure you're taking steps to avoid becoming the next victim of bookkeeping fraud.