When trust is broken, it can be very painful. If it is between a business owner and a staff accountant that was in charge of keeping an accurate accounting, it can really sting. This happened to a pair of Chicago restaurants when they discovered that the bookkeeper had siphoned $600,000 without their knowledge. Their story can help teach you about ways to keep your numbers accurate and your accounts safe.
Lack of Oversight Was Not Right
It turned out that this bookkeeper alone was handling all of the invoices and payments without any additional supervision. The accounts were also reconciled by her, which was where the fraud happened. Within six years, the bookkeeper would produce and deposit checks from the corporate bank account that totaled $604,113. She would deposit them to her account, delete the check record from the ledger, and then pay the same amount to the vendors. This elaborate embezzlement went unnoticed until the owners converted to a new accounting service. It was then that they found the “missing” transactions.
This bookkeeper was working for the restaurants for nearly 20 years. In an article from the Chicago Tribune, it was reported that she became inundated with debts that she could not pay down. This situation tempted her to take the money, taking advantage of her trustful position. The newspaper also wrote that, when this bookkeeper was removed, she stated: “make sure the next bookkeeper you hire doesn’t do the bank reconciliations as well.” This is why it is so important to implement a workflow that separates important financial duties.
Digital Documentation with Cloud-Based Bookkeeping
In this story of the Chicago restaurants, the use of paper checks had left open an opportunity for fraud. The bookkeeper deleted the company checks written out to her and created checks to the vendors with the exact dollar value. If the company used a cloud-based bookkeeping service that utilizes a more secure payment method such as an electronic funds transfer (EFT), the owners could have prevented the bookkeeper from performing these fraudulent actions.
Another benefit of using an outside accounting service is that they can serve as an auditor. The accounting service providers have tools that can help a business owner detect unusual transactions. This is helpful since most likely a small-business owner does not have the skills or resources to constantly manage the finances. Therefore, the owner can concentrate on scaling the business with the bookkeeping services growing alongside. No matter which accounting service you choose, make sure that a financial reconciliation system is in place to prevent you from being defrauded.