A Cautionary Tale for Small Business Owners
An article featured in a Local Newspaper highlighted an office manager who wrote checks to herself for over 4 years, allegedly stealing more than $200,000 from her employer.
This isn’t just a shocking headline; it’s a crucial cautionary tale for every small business owner. It’s common for dedicated office managers or administrative staff to handle bookkeeping to save costs. While convenient, this practice can create massive, unseen risks when proper oversight is missing.
The core issue is a lack of internal controls. When one person has the authority to both write checks and manage the books, there is no system of checks and balances. This is why segregation of duties is not just corporate jargon; it’s a fundamental principle for protecting your assets.
Key controls to implement include:
- Ensuring the person who authorizes payments is different from the person who makes them.
- Having a separate individual reconcile bank accounts from the one handling daily transactions.
- Requiring owner or senior manager review and approval of all bill payments and financial statements each month.
- Utilize credit card payments or ACH in conjunction with Spend Management platforms like Ramp, Bill.com, or Stampli that centralizes AP, approvals, and supporting documents all in one platform.
Many business owners believe they are saving money by avoiding professional accounting help. However, as this $200K case illustrates, the potential cost of fraud, undetected errors, and inaccurate financial reporting can be catastrophic. Proactive accounting and financial oversight are not an expense; they are a critical investment in your company’s long-term health and security.