Reducing the Risk of Embezzlement - By Kelly J. Bullis
Updated: Feb 13
Recently, there have been quite a few news stories in Carson City about local businesses falling victim to embezzlement. It even reached into the Carson City Sheriff’s office last year.
Most small businesses can only afford one bookkeeper who “does it all.” Unfortunately, that is how embezzlement most likely occurs. One person with no oversight or accountability, having access to all books, records, bank accounts, blank checks, etc. That’s a BIG temptation for some folks!!!
What can a business owner do to protect themselves? There are actually some simple steps to take as a business owner that can greatly reduce the risk of embezzlement happening or at least reduce the amount that could end up being stolen to a much smaller amount. None of these steps can guarantee you will escape being a victim, but they have been shown to greatly reduce your risk. Kind of like putting a seat-belt on. You could still be injured, but statistics show that your risk of serious injury goes down significantly if you use a seat-belt.
You as the owner should be the only person to open all bills. Initial that you have reviewed the bill and approve it to be set up for payment. Look at the balance forward. It should not be any different than you are expecting. (For most folks, that should be ZERO.) This step makes it harder for a potential dishonest bookkeeper to record a bill as paid and actually pay themselves instead. Also, it makes it harder for them to create a false invoice for payment. (Only pay bills with your initials on it.) Of course, you should be the only person who signs all checks, and all checks to sign should have the approved bill attached for your review.
You should be the only person who first gets the bank statement (in the mail or from online), read it, initial it and then pass it along to the bookkeeper to perform the bank reconciliation. You should look at cancelled checks to make sure they are all signed by the proper person (usually you), and also scan the transactions for anything that doesn’t look right. Trust your instincts when you see something that doesn’t look right, then make inquiries. Even better, have your CPA perform the bank reconciliations. This step telegraphs to any potential dishonest bookkeepers that there are outsiders looking at bank transactions.
Keep all blank checks locked in storage not controlled by the bookkeeper. When they need to print checks, they have to request them from whomever you have assigned to control the blank checks (who should be a very trustworthy person if not yourself).
Have your accounting records fully accessible by your CPA and engage that CPA to log in and look over the records regularly. In our office, we call it an “accounting checkup” with a specific checklist of items to be checked by the accountant that are designed to quickly identify any irregularities and open those up for further investigation. Once again, letting any potential dishonest bookkeeper know that this step is being done every month usually discourages them from trying anything illegal.
There are many more steps you could take, but these are a great start. At least do these!
Did you hear? Prov 11:27 says, “He who diligently seeks good seeks favor, But he who seeks evil, evil will come to him.”
Kelly Bullis is a Certified Public Accountant in Carson City. Contact him at 882-4459. On the web at BullisAndCo.com Also on Facebook.