Newswires recently reported that famous romance novelist Danielle Steele was a victim of embezzlement by her own staff. The assistant in charge of Steele’s payroll and accounting, who received a salary of about $200,000, stole about $1 million from the novelist. She deposited numerous checks made out to “cash” in her own bank account, used the author’s credit card rewards points, and paid herself more than her salary.
If a rich, famous novelist can be a victim of an accountant’s sticky fingers, how could you, a small business owner, protect your business from embezzlement?
It is ironic that you hire a professional to do your bookkeeping and accounting because you need their expertise to do this work. Outsourcing or hiring an employee to manage the financial operations is supposed to give you free time to do what you do best. But unfortunately, Danielle Steele’s experience showed that you couldn’t blindly trust all your money to a third party, no matter how professional they seem to be. Give them the carte blanche authority, and you risk saying bye-bye to your money.
Here are some things you need to do to protect your business and ensure that your accountant is not dipping his/her fingers into your bank account:
- Learn the language. Educate yourself about basic accounting and finance concepts and terminologies. You are less likely to be swindled if you know how things work. If you know nothing, then you wouldn’t even know that you are already being hoodwinked even if it stares you in the face.
- Open and read your bank statement. Some accountants will insist that bank statements be delivered to them to spare you from trying to make heads or tails of your hard-earned money. However, you need to see it – in fact, insist that you receive these types of mail unopened. Look at the checks that have been cashed, and check the signatures on the check as well as whether you recognize the payee. A lot of small business embezzlements can be prevented by simply checking the bank statements.
- Review your accounts payables. You need to know if your accountant or another staff member is diverting your money by paying ghost contractors. Look at the names of those who need to be paid, and investigate why you are paying them if the vendor seems unfamiliar to you.
- Look at your credit card statements. Check if there are any telltale signs of fraud. Did you really pay for a Tiffany diamond necklace? Why did you pay through Paypal someone from Netherlands? React quickly if you find unexplained charges.
- Lastly, occasionally do sniff tests. You never know what you will uncover.
While you’d like to show your accountant that you trust him or her, understand that this is your business and you need to take certain steps to protect it. Working with professionals does not mean blindly following them, but making sure that they work WITH you to help push your business to success.