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Who Is Watching Your Business? Someone Is. Hopefully It Is You.

Who Is Watching Your Business

A few employees from the office went out together for dinner and a movie. It was interesting when the charges at a local restaurant and movie theater showed up on the next business credit card bill. It was reported to me as suspicious and I took it to the owner. Upon investigation it looked like the employees from the office had charged their night out on a company credit card. But how did they do that? Had the owner given them permission? No, he had not. It was discovered that one of the accountants had, without authorization, requested an additional credit card which she used for personal expenses.

Later, at tax time, a local tax-preparer called to ask about an employee's W-2. I could not give information about an employees salary but the preparer found two things interesting. One, some one from the firm I worked for would come to him to have their taxes done rather than have them done in house. Second, the salary and of course the taxes withheld seemed way too high. He talked to the owner and we discovered the employee had "doctored" her W-2. Actually, it looked to me like she adjusted one of her own payroll checks and then printed out the fraudulent W-2. After that she went back in and changed the check back and reprinted the correct W-2 which was filed. It was clever and well thought out. But she was caught.

After that employee was fired and a new office/personal assistant for the owner was hired, I got a call from a long time customer about a statement that she received from us with an outstanding invoice for her. The problem was she had paid the invoice. What happened was she personally brought her payment in to the office but was not sure who to make the check out to. The new personal assistant told her she would take care of it. We had the customer bring in her cancelled check and it had the assistant's name on it. The assistant had disappeared about week earlier so the owner called the police to press charges. We made sure the police came in to the office so everyone could see what was happening.

Why It Happens

Unfortunately, today many people are dishonest. What did you notice about these situations? What questions do you have? Why would people do this and how did they do it? The why is because of greed and a perceived opportunity. So people actually steal from an accounting firm? How does that happen? Easy, the owner of the firm was distracted by several personal and business problems. But the real problem was the employees knew about it and they knew he was not paying attention.

What Can You Do About It?

You should not have to worry about dishonesty and theft but the reality is you do. What can you do about it? To begin with run credit and background checks before hiring anyone. You also have to pay attention to your financial accounts. It is not enough to pay attention, you have to let everyone know you are watching. You do that by carefully checking each bank and credit card statement every month and every bill your business receives. Then you ask the accountants and the employees questions about the deposits and the bills, checks and charges. In addition match the checks up with your bills. Watch out for fake employees, and watch out for payments of utility and other bills that are too high. A common form of embezzlement is for an accountant to pay both your bill and theirs together when they send in a payment for a utility bill for example. Additionally, send out out statements for outstanding invoices and call to followup on invoices that remain unpaid. You also need to put checks in place to make sure no one can steal from you and cover it up.

Each month you should also review the financial statements and make sure you understand what they say and the story behind the numbers. Does it make sense that a particular expense started to be higher each month starting a few months ago? Why is that happening?  Ask the manager who oversees it and review the bills with him. Oh, and make sure everyone knows you are checking these things out. The temptation to steal from you is not as great when the threat of getting caught is high.

Another lesson is to get the police involved when you discover a theft in your office. Call them in when other employees are there and the word will get out that you mean to prosecute anyone who steals from you.

Yes, you can create an environment that makes theft unlikely. That doesn't mean it won't happen but there is much you can do to make it less likely. It also really helps if your employees like you. So get to know them and show a real personal interest in them. It is hard to steal from a friend.

Get Professional Help

Taking care of your accounting needs is an enormous challenge. I can help you. While I don't do bookkeeping, I do help my clients to review what their bookkeepers do and we review the financial results on a regular basis and plan for taxes too. Many small business can not afford to high a full time CPA to help them with their accounting and manage their business. Instead you can contract with me to regularly help you manage the books and your business and give you an outside sounding board to discuss your business. I can help you and you can keep your accounting expenses at a manageable level. Send me an email today to schedule an appointment to discuss your situation. My contact information is below.

So, who is watching your business. Hopefully it is you. Likely you can use an extra set of eyes to help you to keep an eye on and manage your business. So again, feel free to contact me to setup an appointment to discuss your situation.

Contact the CPA Superhero for help with your business and your life goals. I consult with or coach business owners to manage and grow their business and develop strategies. Additionally, I prepare tax returns for business owners. For over thirty years I have worked with many different successful and unsuccessful business owners and that experience has given me unique insight that you can tap into as one of my clients. So email me today to setup an appointment to talk about your business and your life goals.

Jeff Haywood, CPA
The CPA Superhero

Business Consultant/Coach
Certified Quickbooks ProAdvisor

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The above information is general information, it is not all inclusive, and as always in your tax situation everything "depends on facts and circumstances." So call me to talk about your specific facts and circumstances.

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