Last week, the Kingsport Times News reported that a Knoxville bookkeeper had plead guilty to stealing $4 million from her employer (East Tennessee Bookkeeper Who Stole $4 Million to Finance Luxury Lifestyle Pleads Guilty). What was disturbing about this story is that the perpetrator was on probation for embezzling from another employer two years earlier.
Unfortunately, this story isn’t unique. It is often the case that those committing fraud have done so at previous jobs.
I was once the CFO of a company that was owned by a person who owned multiple businesses in the same industry. A year or so before I started working at this firm, a bookkeeper had used the owner’s signature stamp to sign checks that were deposited in the bookkeeper’s personal bank account. The bookkeeper was prosecuted when the owner discovered the fraud. A few years later, I was at CFO of another company where a vendor had the same bookkeeper use a knife to pick the lock where the company’s checks were stored. These checks were deposited in the bookkeeper’s personal bank account.
What can you do to protect yourself from this happening at your firm?
There are a couple of things you can do to lower the chances that your firm will be the victim of this type of bookkeeper fraud.
The first is to run a criminal background check before making a final job offer to a bookkeeper. Such background checks may run several hundred dollars, but it’s a relatively small amount when compared to what undetected fraud can cost your business. At a recent fraud training session I attended, the speaker told how a motorcycle dealership in Middle Tennessee had to file bankruptcy as a result of a bookkeeper embezzling. Choosing $300 over a liquidation bankruptcy is an easy choice to make.
Second, you can have someone other than the bookkeeper reconcile and review your bank accounts on a monthly basis. If you have time to do this yourself, then you should. If not, a CPA firm can provide this service for you at reasonable costs. By putting a control like this in place, it lets the bookkeeper know that someone else will be reviewing the bank accounts for improper transactions. This should lower the chances that they will attempt to embezzle from your business.
As they say, an ounce of prevention is worth a pound of cure.