0391: Telltale Signs Of Bookkeeping Embezzlement And How To Prevent It


Manage episode 275816029 series 1082451
By Randal DeHart and Randal DeHart | Construction Accountant |PMP | QPA. Discovered by Player FM and our community — copyright is owned by the publisher, not Player FM, and audio is streamed directly from their servers. Hit the Subscribe button to track updates in Player FM, or paste the feed URL into other podcast apps.
This Podcast Is Episode Number 0391, And It's About Telltale Signs Of Bookkeeping Embezzlement And How To Prevent It Bookkeeping embezzlement stems from a feeling of entitlement and the need to get even. Your bookkeeper or accountant will steal if they feel confident they can get away with it and if circumstances allow for it due to weak integrity and a sense of "Redistributing The Wealth, But Not The Work Or The Responsibility." It is estimated that the number of bookkeepers caught embezzling from contractors is less than one percent of the total. In most cases, the ones that are caught are rarely convicted because all too often, it is the contractor who has to spend thousands of dollars on forensic accountants and attorneys to prove the theft occurred. In most cases, it is near impossible to persuade the authorities to prosecute when a contractor bookkeeper embezzles because it is often viewed as a "Victimless Crime."

In most cases, an in-house construction bookkeeper starts with good intentions, and over time they become complacent and jealous of the lifestyle they see the contractor enjoying. Unfortunately, they rarely experience life in construction outside the climate-controlled, clean office with good lighting, real restrooms, beverages, and a relatively quiet environment.

It makes perfect sense for you to delegate all the mind-numbing bookkeeping services tasks as you can. Contractors who want someone to provide Contractor Bookkeeping Services and pay the bills are practically waving a Red Flag and holding a sign that says, I'm stupid, pay my bills and embezzle as much of my money as you want!

When Do Most People Buy A Burglar Alarm? After Being Robbed, Not Before!

Whenever you think it is a good idea to give your in-house bookkeeper or any Outsourced Contractor Bookkeeping Service full unrestricted access on your online bank account, savings account, payroll account, or credit card so they can save you time by paying your bills - take two aspirin and lay down for a nap, when you wake up and still feel it is a good idea, think again and review these telltale signs:

Your bookkeeper...

- asks for signature authority on your checking/savings/payroll accounts

- has a lifestyle that seems above what they are earning

- takes Records Home to work on, or they want to work in the office when no one is around (Fraudulent activities are easier when nobody is around)

- refuses to take a vacation

- has access to your credit/debit cards

- receives mail-order packages at work

- tries to explain delinquencies tax notices

- misplaces payroll receipts, deposit records, supplier letters, and estimates

- has QuickBooks in a complete mess, and you cannot understand any of it

- is the primary contact for your company's banks, auditors, creditors, etc. (gets angry when you ask for a QuickBooks report)

- tries to blame the previous bookkeeper or outside accounting firm for messy QuickBooks

- gets defensive when you or your CPA asks questions

- makes the bank deposits, and they seem to be too small

- does not get along well with other employees and staff members.

- suggests they could save money by getting rid of the outside accounting firm

There are more warning signs, but it's more important to be aware of the actions you can take:

  • You (the owner) signs all checks - Nobody else ever signs any checks. It is okay if your bookkeeper prints the checks; just make sure the owner signs them.
  • Three separate checking accounts - One for your main operating funds, one for payroll with just over enough to clear all outstanding payroll checks, and one for the owner's debit card purchases.
  • You input the PIN - For all payroll or payroll tax deposits. Letting your bookkeeper be responsible for payroll or payroll tax deposits is like giving them keys to the kingdom and saying, "Take whatever you want."
  • No company credit cards - Let employees be reimbursed for company expenses.
  • Every employee needs time off - Any employee that does not want to take a holiday or a vacation may appear loyal, but there could be another reason. It is wise to check each employee's work when he/she is gone.
  • Make bank deposits every day - Rain or shine busy or not. Photocopy and scan all checks and bank deposit slips and upload them to your paperless server.
  • QuickBooks backup copy every day - QuickBooks has a built-in feature that will do it automatically, and there are several other services you can use as well. Never let the bookkeeper take a backup copy of your QuickBooks out of the office for any reason. Doing so will make it easier for them to embezzle and harder for you to claim your innocence.
  • Petty Cash - If you have a cash drawer, balance it every day the same way as a bank account. Bookkeepers who develop the habit of embezzling usually start with taking small amounts, often from petty cash. Keeping track of small amounts of money can help keep large amounts of money from disappearing.
  • Keep blank checks in a safe - Most office supply stores sell small safes for under $150.00, and it is money well spent. All it does is slow down and deter the lousy bookkeeper.
  • Bank and credit card statements - Need to be mailed to a post office box or the construction company owner's home and opened by them. Never let the bookkeeper open any bank and credit card statements.
  • Verify - All check numbers, including voided ones.
  • Check references before you hire - And search for convictions (not charges).
  • Review Your Key Performance Indicators (KPI) - Every day as an internal-control check and watch for unexplained balance changes.
  • Don't hesitate to call the police - If you suspect your bookkeeper is stealing. Waiting can only make it more difficult for the officers, and they may get the idea you are okay with it, which could make it harder to prosecute the offender.
  • Never let anyone take work home - You could get in trouble for not paying overtime, and there are too many opportunities for copying your company files, customer or client lists, and selling them with your competition. (I understand that this is challenging with the current state we live in, it's important to take extra precaution. If most of the actions are followed and you are comfortable with this kind of set up, then it's all up to you in the end).

Final thoughts

Contractors with bookkeepers paying their company bills are begging to be embezzled. Protect yourself, your family, and your company.

There is much work here, but it could save you thousands if not hundreds of thousands of dollars. One of the best ways to limit your bookkeeper embezzlement exposure is to outsource your bookkeeping services to us because we handle all construction bookkeeping services chores, and we never touch your money.

About The Author:

Sharie DeHart, QPA is the co-founder of Business Consulting And Accounting in Lynnwood, Washington. She is the leading expert in managing outsourced construction bookkeeping and accounting services companies and cash management accounting for small construction companies across the USA. She encourages Contractors and Construction Company Owners to stay current on their tax obligations and offers insights on how to manage the remaining cash flow to operate and grow their construction company sales and profits so they can put more money in the bank. Call 1-800-361-1770 or sharie@fasteasyaccounting.com

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