Employee Scammers

Another IT person in one of the organizations I am a part of shared this with me today. I felt that it is something that everyone should hear to make sure they are doing what they need to do to protect themselves.


I spent the morning talking to one of my best friends (and my ‘car guy’).  His admin/bookkeeper embezzled over $30G in the three years she’s worked there.


I’m not looking to get into a discussion about the tech of it, the point is that he is now the THIRD business owner I know who has had this happen to them. Each one has been burned for multiple tens of thousands of Dollars.


His story:

* They use Quickbooks and he has a CPA who looks over the books and does the taxes.

* The admin would run daily reports of sales/expenses and show him

* The admin entered payments, then used QB’s bill pay

* She would then either void the online payment, and print a check to herself in that amount, or show it as something like ‘cardmember services’ but pay her own bill, rather than the company card.

*Additionally, she had work from subcontractors for her personal vehicles, billed to the shop as customer invoices and then paid them out of the company checking accounts.

*Finally, she obtained a second company credit card in her name (for a hardware store and a gas station) but since she paid the bills, he didn’t see the statements listing the second card number.


This never could have happened, to him or the other two owners, if they would have taken the simple steps of signing all checks themselves and auditing at least some of the bank statements to be sure the amounts and payees matched what was in their accounting system.


Quickbooks, as we all know, is made to be easy. It is not, and has never, been a good accounting system. People use it because it allows editing, one sided entries and other poor accounting practices. But, this isn’t really a QB problem, it isn’t a tech problem, it is a management problem.


Personally, I absolutely hate paperless banking, it is far too easy for this crap to happen. You simply cannot lay out statements and checks (or at least images of checks) and properly audit things on a screen, or two. It puts ease of use over being thorough (or careful).


A couple weeks ago I was privileged to see Frank Abangale speak (the subject of the book and movie ‘Catch Me if you Can’), he spent almost a half-hour just on no-brainers an owner should do to prevent fraud. One, having all company bank statements mailed to your home, rather than business, was something I never thought of. He also showed how laser printed checks could be altered in less than five minutes and ink jet or written ones (except with a special pen, which he gave us) could be washed off of most so-called security paper in less than a day. Protect yourselves with a security inked pen, multiple person accounting process and Positive Pay.


My buddy is in his upper 60’s and was starting to think of retiring, now he’ll be working for years just to get back what was taken from him. Please do not let this happen to you. NEVER EVER be too busy, or think yourself too important, that you can’t pull a bank statement and verify every payment on it and NEVER EVER allow the same person who enters the payment information to submit the payment, or sign the check.

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