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If Your Books are a Mess and You Have a Bookkeeper - Watch Out!

 
March was the month of embezzlement. I learned of three companies whose bookkeepers stole money from them.

All of them left tell-tale signs. And sadly, all could have been caught quickly (or bookkeepers would have never embezzled at all) by the owners doing one simple thing - having their bank statements sent home.

So, if you aren't getting your bank statements at home, stop reading this email and call you bank. Have your address changed to get your bank statements at home. Look at them! The microfiche's show signatures, who the checks were written to, and the numerical sequences. If something doesn't make sense, then start asking questions. This is your first line of defense!

If you have a bookkeeper, who supposedly knows what he or she is doing, and your books are a mess, the first question you should be asking is, "Why?" If a bookkeeper knows what he or she is doing, your books should be clean. They should be readable. If they are a mess, then you may have an embezzler. By keeping the books a mess, the embezzler can easily hide his or her actions. You can't follow what's going on in your business so you probably won't catch the embezzlement.

If you decide to get an audit, or have someone like me look at your financial procedures and financial statements, then don't be surprised when the embezzler strongly objects to an outsider reviewing the books. Or, when an outsider does come in, the bookkeeper quits - usually with a flimsy excuse.

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Many owners, once they have a bookkeeper, totally abdicate the responsibility for the financial segment of their business. As long as there is enough cash, they think they are ok. Many times they are not.

You can delegate responsibility for the day to day bookkeeping activities. You cannot abdicate the responsibility for reviewing the statements each month. If you take the time (usually less than 30 minutes a month) to review your financial statements, you'll know if something doesn't look right or the statements don't seem right. Start digging and question the entries. Ask for backup to make sure the values are correct. It's your business. You have a right to see the backup proving the correct amounts for the entries.

What else can you do in addition to sending your bank statements home?

Make sure you have a weekly cash flow report, review your financials monthly, pay attention to your gross margins (they must be consistent!), and trust your gut.

If you feel something is wrong and things don't make sense, then something probably is wrong. Most times we don't want to believe that someone is stealing from us. However, unfortunately it happens to hard working business owners all the time.

Put procedures in place to lessen the chances that embezzlement happens to you!

Ruth King is CEO of HVACChannel.tv and the author of the best selling book, The Courage to be Profitable. Email her at rking@ontheribbon.com.

 
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