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  • Writer's pictureareinabookkeeper

Not Sure If You Can Trust Your Bookkeeper?

You have all heard it in the news. Another bookkeeper has been arrested for embezzlement, fraud, theft, whatever. It happens far too often! It is actually pretty common to be burned by your in-house bookkeeper. I spoke with a man recently who had been taken for thousands of dollars. How can you protect yourself and your business and enjoy the benefits of working with a skilled and HONEST bookkeeper?

It can be a stressful situation. You need to be able to trust someone to help you with your bookkeeping. You need to spend your time on other things. But how can you be sure you can trust your bookkeeper?

Here are some things to watch for when you are worried there might be something shady going on:

1. Is your bookkeeper taking longer than usual to respond to you?

This is not something you should just let go! Your bookkeeper should respond quickly and have the answers you need. If they act defensive about any questions you ask regarding your financial information, that's a red flag!

2. You don't have access to your accounting system or reports.

There is no reason for this to ever be the case! Quick Books and Xero are cloud-based software which can be accessed by you whenever you want. You will have full access to your own information any time. Don't trust anyone who wants to "keep your information on their server". That information belongs to you.

3. You notice that your invoicing/payments aren't being handled correctly.

This is something that is much more common then you would think. It isn't always that your bookkeeper is stealing, it could also be that they have no idea what they are doing! Either way, correctly accounting for your income is vital to your business's survival. Review your Income Statement often (I will review this with you monthly) to be sure your income is being recorded properly.

4. Transactions aren't being coded consistently.

Again, not always theft, but this can cause major problems. You need to have an accurate picture of your business activity. Each transaction must be coded (in the Chart of Accounts) correctly and consistently. Take a look at your COA from time to time. Pay attention to any odd looking accounts. Bookkeepers can siphon money into these without anyone realizing it. Also, if transactions are not coded into the proper accounts, your taxes won't be accounted for correctly.

5. Not completing monthly bank reconciliations.

You might be surprised to hear that bank feeds aren't always accurate. Often your software will pull over a transaction twice or leave transactions out. For your books to be completely correct, the information in your accounting software must match your bank and other accounts exactly. If your bookkeeper doesn't seem to need your statements, that is a huge problem!

6. You notice Reconciliation Discrepancies on your P & L.

This is a big red flag! You will see these on your Income Statement (P&L) when someone has forced a reconciliation that didn't actually reconcile. If you want to review this information, look at the Income Statement and General Ledger from the month in question. The General Ledger provides a record of each financial transaction that takes place during the life of an operating company. So every transaction you make through the bank or other means will be recorded there. Check this against your bank (and other) statements. If you are finding discrepancies, you should ask your bookkeeper about it.

7. Your books just don't add up.

You should ALWAYS have a rough idea of how much is coming in and going out of your business each month. If these amounts are different that what is on your monthly Balance Sheet, Income Statement, and Statement of Cash Flows, then there is something going on that isn't good. Your bookkeeper could be totally clueless OR they are doing something shady. My motto is "Trust but verify". Your bookkeeper could be up to no good, at your expense!

8. There is no Segregation of Duties.

Your business should NEVER have just one person responsible for too much. From an article in

"The segregation of duties is the assignment of various steps in a process to different people. The intent behind doing so is to eliminate instances in which someone could engage in theft or other fraudulent activities by having an excessive amount of control over a process. In essence, the following three general functions in a process should be split among different people:

1. Physical custody of an asset 2. Record keeping for the asset 3. Authorization to acquire or dispose of the asset"

Segregating duties is important to keeping your Assets safe! If your Bookkeeper is writing checks to pay bills, and also reconciling those checks, there is the potential for fraud. Make sure there are several eyes on your money at all times.

Many (or all) of these situations can be avoided by simply communicating with your bookkeeper often. You want them to keep your financials in order for you, but they are yours and are key to maintaining a healthy business. I provide monthly phone meetings with all of my clients so that we can review the past month's ins and outs together. I will provide insights to the health and stability of your business and you will have the opportunity to ask questions and add information that may need to be shared. Together we will work to make your business run as smoothly and efficiently as we can. I believe that your success is my success and I treat all of my clients as family.

I would love to set up a phone meeting with you to find out how I could help you too!

Click here to book your consultation!

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