By Rhonda Savage
With the economy improving, John was thrilled to see his small company starting to boom. With all the new business, he was busy signing new accounts and training his new staff, so he delegated the bookkeeping responsibilities to a long-time employee he trusted. As time passed, John started noticing discrepancies in the business account and discovered the employee had been embezzling money from the company.
Unfortunately, embezzlement is not uncommon and is often difficult to detect. What could John have done differently to prevent this?
Embezzlement is a crime of opportunity and trust. A trusted person is placed in a position that allows him complete access to the financial data of the business, typically with minimal or no oversight by the supervisor or owner. The best way to prevent embezzlement is to be honest yourself in your activities. Leaders must lead by example. Second, pay and treat employees well. Finally, hire the right employees. Start by checking all references.
Consider obtaining fidelity bond-insurance coverage on the employee in charge of your books. If the employee is not bondable, do not place him in the position of handling your financial matters. Run a criminal background check.
Here are more techniques you can take to decrease the opportunity and temptation for embezzlement.
Assign designated duties. Don’t have just one person handle your incoming mail and deposits, balance the checkbook, or send statements. Instead, parcel out these duties. This is difficult in smaller businesses with only a few staff members. In this case, the owner needs to handle or outsource payroll, tax preparation, and account balancing and management. If he chooses to outsource this work, the same due diligence of inspecting the bookkeeper's work is very important.
Review reports. Every day, generate an end-of-day report, an adjustment report, and a history of payment that breaks down cash receipts, credit card payments, checks and outside financing for services on your desk. The owner should compare the deposit-slip receipt to the deposit. Do an occasional mini-audit of the books. Let your staff know you're looking every day by questioning them. For example, say, "I see Mrs. Smith didn't pay this month’s rental fee. Is there a reason why?" This shows your employees you’re keeping an eye on the day's activity. These checks take five to 10 minutes of your day.