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I am always asked if it is wise to speak openly of how bookkeepers steal since I may be giving bad bookkeepers new ideas, causing business owners to lose money and sometimes even force them to put their businesses for sale. My answer Briefcase Full of Cashto this is always…Absolutely. It is absolutely a wise idea to inform Small Business Owners about where money might be leaking from their business. I especially think it wise since most bookkeepers usually already have this information, and if they go unchecked, the temptation to steal can be so great, morals and ethics fly out the door…especially since embezzlement can often happen for years without getting caught, and if they do get caught, most Small Business Owners never get their money back. In fact, you have to ask yourself, if you had the opportunity to steal from a bank and never get caught, would you do it? That’s how tempting it can be for a bookkeeper if given the opportunity. Therefore, in this fourth article of it’s four-part series I list three very common embezzlement scams:

  1. The Post Office: The Post Office is a common place where scams can be run. It has nothing to do with the people there, it is simply the way the Post Office was set up to be accommodating to the general public. Here are two common scams and what you can do to protect yourself.
    1. Stamps: If a letter has too many stamps on it, the post office will happily offer a refund of excess postage. Unfortunately, that means that if too much postage is purposefully put on one item, anyone can take that item to the Post Office for a refund in cash. Again, it is an easy scam to pull off and can be easily hidden if a company sends out a lot of marketing mail or bills.

<!–[if !supportLists]–>· <!–[endif]–>Protect Yourself By: Keeping track of how many stamps your bookkeeper has at any one time and how many stamps are given out to other employees. This can be done by simply keeping the stamps in your own desk. If you have a postage machine and cannot monitor stamps given out, take items to the Post Office yourself or give those items to someone in the office who has no access to the machine. This way, there is some accountability in the office and offers some protection to you.

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    1. Money Orders: In case you were not aware, the Post Office does offer money orders for sale. Unfortunately, this means that an embezzling bookkeeper can take any check written to the Post Office and have it turned into a Money Order made out to themselves. That money order is as good as cash and can be put into any bank account without a Small Business Owner ever knowing.

<!–[if !supportLists]–>· <!–[endif]–>Protect Yourself By: Demanding to see receipts from the Post Office immediately. The Post Office always gives a receipt when it makes a sale, no matter what. If a money order is purchased from the Post Office, that money order is going to show up on the receipt. By reviewing receipts every time someone goes to the Post Office, you will know immediately if any money goes astray.

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  1. Payroll Taxes: Using Payroll Taxes to embezzle thousands of dollars is one of the most common ways a bookkeeper can steal. It is so simple and so easy, that many people do this year after year without ever getting caught. What they do is pay too much in taxes every single pay period, whether to themselves or a ghost employee. Then, at the end of the year, they file for a refund and get back thousands of dollars instantly.

<!–[if !supportLists]–>· <!–[endif]–>Protect Yourself By: Having your accountant review and/or file the payroll taxes every quarter. Specifically ask them to check for this kind of fraud since accountants don’t look for embezzlement unless you ask them too. If the taxes are too high, an accountant will let you know.

  1. Redirected Payments: This is where things can get a bit tricky. Bookkeepers, good or bad, are in charge of writing checks. If an embezzler is smart enough to not forge a check, then an embezzler is also smart enough to get a Small Business Owner to sign a check for them. However, if a signed check gets to the person or company its supposed to get to…well, that is another story. It is very easy for an embezzler to get a Small Business Owner to sign a check to a company, and then deposit it into a different account.
    1. Consider this: You have a Citibank Business Credit Card. You charge on it every month and therefore, every month a payment has to be made. Once a month like clockwork, your bookkeeper comes to you with a check for payment. You think nothing of it and sign it never suspecting possible foul play. You also don’t notice if an account number was or was not listed on that check. Once you’ve signed that check and let it leave your sight, an embezzler could then put their own Citibank credit card number on the check paying off their own credit card instead of yours. Then, they would make the minimum payment on your card so that you would never suspect anything is wrong since you can still charge on your card. This can be done with any number of payment checks whether to credit cards, banks or even the IRS. Even if there is an account number on the check, it may not be yours…afterall, do you have all your account numbers memorized?

<!–[if !supportLists]–>· <!–[endif]–>Protect Yourself By: Always be the first to look at the mail…especially bank statements and credit account statements. If listed payments are less then what you remember making, you have an excuse to go and find the check. If checks have account numbers crossed out and new ones written out, you will be the first to know by simply opening your bank statement first. Anything that has white out or has been crossed out should set off alarm bells. Check these items closely right away to catch an embezzler as soon as theft occurs.

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While there are many other ways that embezzlers steal, this is just a few of the most common ones. Also check out the other articles in this series about Protecting Your Small Business from Embezzling Bookkeepers. Part 1 will teach you how to protect your Checking Account, Part 2 lists ways to stop Credit Card and Identity Theft fraud, and Part 3 discusses Ghosts in the Company. 



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