You may recall a recent Alert,
describing a CEBI Member's loss of $50,000 due to weak internal
financial controls. In that same Alert, a case of a $530,000
employee theft loss was also described. Click here to review that Alert:
Only two months later, my morning paper reported yet another
local employee theft, this time of
How? In this case, the same
person was responsible for both writing checks and reconciling
the payroll and operating checking accounts with the company's books. She had been
writing checks to herself since 1998. A classic breakdown
in financial controls.
What to do?
First, make absolutely sure that the
person doing your bank account reconciliations is not the same person
writing or signing checks. Many business owners have their
cancelled checks and bank statements sent to their homes, and at least
make the pretense of having opened and reviewed the statement
themselves before handing it to the person doing reconciliations.
How long would it take you to thumb through a month's cancelled
checks, if $2.9 million was at stake?
Again, this time of year is a great
time to launch an "Internal Financial Controls
Review/Audit". Get it done before the year-end pressures
set in. It's probably worth some fees to your CPA or another
service provider to come in, have a third-party look at how you do
business and handle money, and give you the peace of mind of knowing
that you're as well protected internally as you can be. It
might also be a good time to check with your insurance agent to see
that your "employee theft" coverage is adequate. These
cases can add up to real money over time.
As always, this is an Alert based on
general information. Your situation is unique, and
you should rely on your own trusted advisors in making any