Is Your Bookkeeper Stealing From You?

Having a bookkeeper gives small business owners peace of mind knowing that income and cash flow are well taken care of. However, discovering that your bookkeeper is stealing from you only denotes that your business has very little chance of success. The tricky part about bookkeeping is that you will never know that fraudulent transaction happens until you discover your financial records. Failing to pay close attention to your records can make you more vulnerable to employee theft. Here are signs our bookkeeper may be getting more than just his or her paycheck:

1. Discrepancy with your bookkeeping records

One of the things to look for when you are highly suspecting your bookkeeper of stealing from you is by checking your bookkeeping records. This is one way to detect that your bookkeeper has been manipulating your records. While occasional adjustment is considered normal, seeing a pattern without any valid explanation only shows that there is a serious problem. If books are not adding up and you do not know where problems are coming from, you will need to ask hard questions to find out about the discrepancy.

2. Maintaining higher level of secrecy

If there is one person that should be the most open within your business, it is your bookkeeper. A bookkeeper is responsible for showing you everything within the bookkeeping software at all time. It is a cause for concern once a bookkeeper is trying to hide the books from you. Since you are the business owner, there is no valid reason that you should not see the books. If a bookkeeper is habitually stealing from your company, he or she will hesitate to turn over financial information.

3. Insufficient cash flow

Businesses regardless of the size should give importance to cash flow because it is the lifeblood of every business. The reason you hired a bookkeeper is to keep your business on the right track. Most business owners can easily predict the levels of cash based on the number of customers they have. The number of invoices being sent out also gives you an idea of your funds. You can easily uncover a problem by considering this factors.

4. Resisting bookkeeping assistance

Although bookkeeping for small business is a job that one person can work on, there are times when two heads are better than one especially when you are you have a lot of bookkeeping obligations to handle. However, a bookkeeper who prefers to work on their own may have an ulterior motive, which you need to find out as this is considered a red flag.

What Can Small Business Owners Do To Prevent Fraud And Theft?

Discovering that the employees you trust for many years have been stealing from you is definitely devastating. More often than not, fraud and theft happen when you least expect it. When you have trusted people around you, there are no nagging doubts that you will fall victim to these crimes. As a business owner, being cautious is necessary. Even if you have the most trusted employees, fraud and theft can take place when you do not keep your books in check. Here’s a guide to preventing or reducing employee fraud and theft:

1. Post a code of conduct

Some business owners implement stringent policies so fraudulent activities do not go unchecked or unpunished. For instance, Walmart does not allow employees to accept a cup of coffee or a bottle of beer from a vendor without paying for it. It sends a signal to everyone that the company is not tolerating the illegal behavior. Although not everyone can be as strict as Walmart, posting a clear code of conduct will make employees aware that misbehavior is unacceptable. The code should be given to everyone upon hire. There should also be a written acknowledgement to ensure that everyone agrees and understand it. Being the enforcer of the code, employees are also expecting you to lead by example. What is the point of following strict rules if employees see you use company property or take home merchandise?

2. Create organisational checks and balances

For small business owners, wearing many hats is normal, but multitasking can be dangerous if it involves opening the mail, handling payments and deposits and filing transaction documents. These aspects of the business should not be assigned to one person only. Assigning the same task to the same person only spells trouble. There should be separate people for managing accounts payable and receivable, handling purchasing and more.

3. Have clear policies and procedures

While your bookkeeper takes care of bank and credit card statements most of the time, there should be another person to reconcile bank statements. However, this person should not have the ability to modify or enter transactions in the accounting system. The modification must be restricted as this only opens the door to committing fraud. Confidential financial information must be locked up. Enforce rigorous key control and have a computer-system access. It is common for business owners to retain login information without realising that a departing employee still has it. Change your login credentials once the employee leaves.

4. Observe employees’ behavior

A tell-tale sign that your employee is committing or about to commit theft or fraud is when there are changes in their behavior. Have files been misplaced? Are they giving customers excessive attention? Are they routinely working early or late when no one else is around? While you may dismiss it as working extra hours because they love their job, it is also a sign that they do not want others to see what they are doing. Even minor blips in your operation is already a red flag.

Once you feel that something does not feel or look right, it is probably not. Take time to investigate as you could be losing a big amount of cash.

How To Keep Your Business Safe From Fraud?

If you are the type of business owner who looks over your shoulder, checking whether or not your employees are committing fraud is a sign that you are experiencing embezzlement. It has been found that 28% of small business owners have experienced embezzlement over the years. This is alarming because before fraud can be committed, an employee has to earn a business owner’s trust. Embezzlement is costly as it results in paying penalties and interest on underpaid or unpaid bills and taxes.

There are three factors that can lead to fraud:


Bookkeeping reduces the risk of embezzlement. Also, you need to check reports regularly even if they are delegated to to a bookkeeper. Since you are the business owner, you will be the one who will get assessed interest and penalties especially for missed tax payments. The ATO will chase you for the unpaid taxes.

How to ensure your employees do not commit fraud?

Unfortunately, frauds are discovered when it is too late. The good news is you can limit opportunities for theft with these following steps:

Run a background check on your employees

Anyone can pretend to be a great employee and even fake credentials. Business owners must make it a habit to run a background check before deciding on hiring a bookkeeping. You will never know an employee’s reputation unless you take time to know them.

Delegate tasks and responsibilities

It is difficult to monitor signs of fraud if you delegate responsibilities to one person. Responsibilities must be separated or assigned to different people so you can easily check if there are traces of fraud.

Check transaction history

More often than not, fraud is committed through checks and credit card. These transactions will only be discovered if you check the transaction history. Business owners must take the time to set up automatic payments, review reports, pay bills electronically, avoid signing blank checks and use secure checks.

Monitor payroll, accounts receivable and payable

Aside from monitoring reports, it is also important to monitor accounts receivable, accounts payable and payroll. Accounts receivable refer to open invoices while accounts payable refers to unpaid bills. Payroll must also be monitored such as the deductions, commissions, wages, overtime and timesheets.

It takes time and effort to ensure fraud is kept at bay, but it is even more expensive to let fraud go unnoticed. Aside from penalties and interest, your company may also run the risk of going out of business because of cash flow problems.

How To Protect Your Business From Fraud?

Small businesses are vulnerable to fraud and because there are too many priorities to think about, the company’s level of security has to take a backseat. Aside from investing in high levels of security, there are also other practices your company should follow to reduce the risk of fraud.  There are many types of fraud that a small business may face. Fortunately, there are ways to avoid or at least minimise them.

Set Boundaries

Shared passwords increase the risk of fraud. Setting clear boundaries decreases the likelihood of fraud. A code of ethics may be difficult to follow for small business owners. If expectations are not properly set, it will be difficult for you and your employees to draw the line. Boundaries do not only protect you against fraud but your employees as well. Putting rigid policies in place will prevent instances in which you say one thing and enforce another. A code of ethics also take you in the right direction in the event matters are taken to court. When you have encountered breach of agreement, the first step you will take is to document it.

Verify Reports and Receipts

A bookkeeper can keep things organised, but this does not mean that you will no longer actively participate in reviewing reports. Being hands-on allows you to prevent oversight. If transactions are not authorised, the reports will clearly show where your business is headed. Deposits, invoicing and even outside audits must be properly verified. In the long run, you will be able to uncover fraud or even prevent it from taking place as your employees are fully aware you are also doing a personal audit.

Perform a Background Check

It is not easy to hire employees especially for small business owners. A basic resume can be peppered with impressive descriptions to win the nod of employers. References are important as it enables you to know a potential employees work ethics. Before you consider hiring an applicant, the conversation must be enough for you to gauge their character. More due diligence is essential if the job requires additional responsibility.

It takes a lot of hardwork to run a small business successfully. Fraudulent transaction is one thing to worry about. There are even businesses that discover fraud when it is already too late. Aside from breaking up essential tasks, setting clear expectations is also important. Violations of polices must not be tolerated so employees know you are serious about implementing stricter rules.

Business Fraud Prevention

Small and big businesses alike are vulnerable to fraud. Blank cheques and fake invoices are evidences of fraud.

As a business owner, the first step to preventing fraud starts with knowing the methods employees use to execute a fraudulent activity. Stealing can be done in many ways and one of which is by placing inventory in garbage bins as a way of hiding stolen objects. Employees can resort to this extreme and desperate measure to steal.

Another cause for concern is when you see a bank statement addressed for a friend or a bookkeeper, but not your vendor. Sure you can consider one mistake as due to incompetence, but if it happens habitually, you know that something is cooking.

Ways Fraud is Committed

A business owner may think that bookkeepers just do not know what they are doing, but there are telltale signs that you should look out for to determine if there really is a case of fraud. If a bookkeeper takes time off, and cannot deliver monthly reports, you know that you need to conduct an investigation. It is very unlikely for bookkeepers to not have the ability to match accounts receivable and accounts payable to the balance sheet considering it is their job.

Not generating an updated financial report raises questions because this is one of the important tasks that a bookkeeper should carry out regularly. There can be some lame excuses such as faulty software or the lack of resources to reconcile a bank account.

How to prevent fraud?

Bookkeepers must be given deadlines as a way of preventing unusual activities. Reports must be delivered to you after month-end and reviews must be done on a monthly basis.

It would also be helpful if you separate bookkeeping duties of your business. Assign a person to enter the bills, and another for paying the bills. There should also be an evidence of financial transactions made. For instance, employees should attach cheques to invoices so you can monitor where the money is spent. Do not forget to sign all your checks as well.

You will also have to perform physical inventory checks. It is important for employees to be aware that you are monitoring transactions. Ask questions and get regular updates from your bookkeeper. It is easy to overlook these things if you remain complacent about your business activities. Do not wait for the time when you have to look over your shoulder as paranoia has already feasted upon you. If you suspect that your employees are engaging in fraudulent activity, act swiftly before matters could get worse.

3 Types of Fraud That Can Have A Negative Impact On Your Business

When it comes to managing your finances as a business owner, you should not go completely hands-off. This is because signs of fraud can be easily detected if you take the time to check your financial records. Fraudulent activities can affect your business causing you to lose a vast amount of money. There are three types of fraud you need to avoid as they can definitely hurt your business if they go unnoticed.

1. Over-ordering fraud

If you have a client who would routinely order and receive supplies from your company, there should  be something you need to look into especially when you see that the client is already over-ordering supplies even when it is considered unnecessary. The client may return supplies in exchange for a gift card and take the remainder in cash. You will never know the amount of cash stolen especially if this fraud has been ongoing for one year. This type of fraud can be avoided if you are going to do the right thing from the start. You have to keep in mind that bad employees can ruin your company. If your employees are not well-compensated, they would feel as though it is just fair to steal or engage in a fraudulent activity.

2. Payroll Fraud

Have you ever noticed that your payroll account has not been reconciled to your time-keeping system? Payroll fraud is perhaps one of the most common types of fraud you need to prevent as it can cost you thousands or worse, millions of cash. For instance, you may see your company record where two employees and their manager were working massive hours. Of course, they are paid a ton of overtime for it. However, something is not right because the timesheets revealed the discrepancies. Before you realise you are a victim of payroll fraud, the money is already gone. Payroll fraud can happen to any business owner. When a figure is left unchecked, it can easily go unnoticed. You may check the records and still feel that you are keeping clean records, but as the fraudulent activities progress, you will come to realise that there are irregularities you need to investigate.

3. Double Check Fraud

This is the type of fraud that is hard to catch. Even if you are the type of business owner who looks at the financial statement frequently, you will never suspect any fraudulent transaction because the figures seem reasonable. However, the amount can add up very quickly because of writing double checks on a monthly basis. You can only detect this fraud if you decide to change your bookkeeper. The new person will notice that the bank account has not been properly reconciled in months. This is where multiple payments in the same month occur. Have an outsider check your books and reconciliations annually at random times so you can check  some discrepancies.

Bookkeeping Fraud: Is Your Business Safe?

Keeping track of the financial activity of your business is a critical role every bookkeeper should perform. You may have surely heard of horror stories about bookkeeping and accounting fraud, but due to its prevalence, it becomes a regular habit that business owners should get used to. However, just because fraud occurs regularly does not necessarily mean you should not do something to take care of your business.

Identify Signs of Fraud

Misfiled Paperwork: If you have trouble finding business records such as payroll records, deposit slips and supplier correspondence, then you need to ask your bookkeeper to produce them. While it can be easily misconstrued for sloppy filing, you still need to make sure that you are regularly keeping track of your financial transactions. Watch out for government letters about delinquent bills because in this case, your bookkeeper has a lot of explaining to do.

Inconsistent Financial Statement: When there are omissions and misstatement of financial data, it is a clear sign of fraud. While mistakes in data entry can be committed from time to time, when it is done deliberately, it becomes a fraudulent activity especially if it is done on purpose.  As a business owner, it is important you check your financial statement. With that being said, make sure you learn how to read the statement.

Incorrect Procedures: Bookkeepers need to follow correct payroll guidelines and procedures and if they are reluctant to adopt new processes it is necessary that you insist they should strictly follow new procedures. The payroll and financial records for previous years must also be investigated.

How to prevent bookkeeping fraud?

Create a reimbursement and expense policy. Instead of billing your credit cards directly to your company, bill them to your employees. You should also have an expense report for each employee and require them to turn in original receipts. Do not forget to set a daily limit so you will be able to control the amount that your employees spend. With this policy, you will be able to monitor expenses that are eligible for reimbursement.

Review financial records.  One way you can verify that sales are recorded is by keeping a financial record. Make sure the records are complete and if you find out that the customer records are incomplete, you should ask the person in charge of collecting money from customers. There should be checks and balances implemented so debt previously written off are properly recorded.

Avoid sharing passwords. It is common for most people to share passwords especially when separate user accounts are not available. For instance, if an employee wants to make changes to the account, there is no other option but to share passwords. As a result, you have lost control of permission security and unable to determine who made the changes to the account. It is important that Administrator password is controlled by senior management to prevent fraud.

Create a separate account for petty cash: You can easily monitor expenses if you have a petty cash account. This way, the expenses are properly recorded and tracked in a timely manner.