Embezzlement.
And ugly word for an ugly thing.
It’s what happens when someone you trust steals money from you. Like your bookkeeper.
“How could they do this?” you wonder. “Why would they do this?
Two really good questions.
The “how” is pretty straightforward: there are inadequate controls put in place in your company’s operating procedure. The solution is equally straightforward: put controls in place; have checks and balances, such as:
Control #1: When cash is involved, have two people count it.
Control #2: Separate duties. One person records stuff into QuickBooks (or Zero or FreshBooks) and another person reconciles the bank and credit card bank statements.
I used to work for a temp agency back in the day and one of my assignments was to fill in for the Accounting Manager of a non-profit who had been fired after having been escorted off the premises in handcuffs.
Seems her past caught up with her. She had embezzled money from the previous non-profit she had worked for. I was brought in to audit the books and see what, if anything, she might have stolen from her current employer.
Turns out it was plenty.
The non-profit held a fundraiser every year and that event generated quite a bit of cash. She skimmed some off the top and no one was wiser because, and here’s mistake #1, she was the only person to count the cash. What should have happened is that two people should have counted the cash, each acting as a check for the other. (If they were both crooks and conspired to steal together, that’s another story.)
The agency was small. It had an annual budget of just over $1MM. As is usual in small companies and non-profits of this size, she was the accounting department. That meant she did all the bookkeeping from soup to nuts. We don’t really know exactly how much cash she skimmed, because we don’t know how much was brought in. It’s only because she admitted doing it that we know for sure that it happened at all.
In addition, she had a company credit which she used to purchase personal items for herself. Not extra tchotchkes for the office but airline tickets, clothes and shoes. Thousands of dollars. And she was able to do this because of mistake #2: she not only recorded the credit card transactions in QuickBooks, she reconciled the bank and credit card statements. This allowed her to falsify entries and record her personal groceries as “Office Supplies.” She buried her charges in plain sight.
The “why” runs the gamut. Everybody who does it has a good (to them) reason. But it boils down to either rage or desperation.
Some people are angry at their boss because they were passed over for a promotion or a raise.
Some people’s personal circumstance take a dramatic turn for the worse; a child gets really sick and their insurance doesn’t cover enough.
Some people think they are underpaid and they are just making up the difference, taking what they deserve.
Some people would never have taken the money if proper controls had been in place. Those people succumb to temptation; they do it because it’s easy to do.
Some people start off by “borrowing” the money, fully intending to “pay it back.”
Think that embezzlement can’t happen to you? Think again. It can.
Don’t want your bookkeeper to think that you don’t trust them? Get over it! Honest bookkeepers want controls. Controls protect them and they want the assurance that if someone else does something, they won’t be falsely accused.
Putting controls in place provides a very real service to your employees. It removes temptation for those that might be tempted should they fall on hard times. It helps them be their best selves. A boss of mine taught me that years ago. Thanks Phil. I’ve never forgotten it.
Put checks and balances into place. It’s the right thing to do.
Leave a Reply