I don’t know about you, but I became obsessed with Inventing Anna on Netflix, the story of a fake German heiress who scammed super wealthy people (who “should have known better”) out of hundreds of thousands of dollars. The complexity of her mind was what fascinated me, and it led to a general obsession with shows and podcasts scammers, frauds, con artists, whatever you want to call them. I fell deep into the Season 1 of the Queen of the Con podcast about a scammer called Mair Smyth, which led to Season 2, about a person that makes my blood run cold – a CPA named Lizzie Mulder who scammed her clients, the people who paid her to manage their money, out of unspeakable sums, causing lifelong financial and emotional consequences for her victims.
A lot of people think they are immune to scams, but the truth is, we are all vulnerable. Con artists is literally short for “confidence artists.” These people have tactics to gain your confidence – offering to help you, borrowing money and then immediately paying you back – the first time anyway – so you’re more likely to loan them greater and greater sums, creating fake email accounts and phone numbers to prove they are associated with influential people, even downloading voice distortion apps for their phones and pretending to be other people. As technology evolves, so does the con game.
Now, I don’t tell you all this to scare you, I just want you to be prepared and to protect yourself. Your business is your lifeblood, your passion, and while I want you to outsource your bookkeeping when you can so you can focus on the aspects of your business that you love, you need to look out for some things before handing your precious finances over to someone else. In many cases, you need to protect not just yourself but your employees, your clients, and your family. That is some serious business.
Bookkeepers are never supposed to violate what is called internal controls – the policies and procedures a business or nonprofit should have in place to ensure your accounting is sound. While it is technically on your as the business owners to have these in place, any bookkeeper worth their salt should follow them religiously. Never violating internal controls is part of our Generally Accepted Accounting Principles (GAAP). If your bookkeeper hasn’t heard of internal controls or GAAP, you do not want to hire that person.
So here is a list of things you can and should do to Protect. That. Cheddar. I’m going to try to write these up in the least boring way that I can.
- Your bookkeeper should NEVER have your checkbook.
This internal control is called separation of duties. The general rule of thumb is, the person who does your books should NEVER. EVER. EVER handle your cash, your checkbook, your deposits, etc. Why? Because a bookkeeper looking to con you can make an entry into your accounting software (like Quickbooks), let’s say for a payment to your electric company or your credit card company. This could be a legitimate expense, but they can turn around and write that check out to themselves, or some shelter company they’ve designed so they can deposit your checks into it and make it look legit. Meanwhile, you’re not actually paying your electric bill or your credit card, so you’re racking up huge debts and risking being cut off from services.
There are safer ways that you can outsource your bill pay to your bookkeeper. There are apps (there is one in QBO called Melio), where you can set up and import your bill accounts. Then you can give your bookkeeper access on a restricted basis, so they can check the bills that need to be paid, then send them back to you for final approval. This way, you can monitor the money that’s going out.
Again, you should never allow your bookkeeper unrestricted access to your money.
2. Don’t grant unlimited access
Don’t ever give your password to your accountant or bookkeeper. If they tell you they need that, this is a huge red flag. In Quickbooks (or any accounting software), you can add an accountant, and then they can log in with their own username and password. Same thing for bank accounts. It is okay to add read-only access to your bank accounts so that they can see your bank statements and reconcile them without the need to hound you for them. Same thing with setting up bill pay software like Melio, or connecting your bank feeds in your accounting software. Your bookkeeper should never just “do it for you,” even if you know for sure their intentions are just to save you time. I personally do little video tutorials so my clients don’t have to go looking for the information, and can hook up these things at a time that is convenient to them without me looking over their shoulder.
Even if you’re granting read access only, you should always keep a list of every person who has access to your financial accounts, along with their level of access. You should also review these regularly to make sure to remove people who should no longer have access.
3. Keep an ear out for a pattern of many excuses.
You may not want to hear this, but every bookkeeper or accountant will make a small mistake from time to time. We’re human just like you, and we have a lot of numbers swirling around in our head. A good bookkeeper will have solid processes in place to reduce errors, but it happens to the best of us. However, if you are constantly having issues with your vendors or creditors calling to tell you you’re in arrears, or you’re consistently having issues with payroll, this is a clear red flag. Especially if your bookkeeper insists on talking to the vendors themself, and especially if nothing ever seems to be their fault. The difference between a good bookkeeper and a bad one is that a good one will admit when they’ve made a mistake and tell you how they plan to ensure it doesn’t happen again. A scammy one will make excuses, try to convince you you’re crazy or don’t know what you’re talking about in order to get you to ignore your ever-important gut.
4. Conduct regular physical counts – not by the bookkeeper
Whether or not your bookkeeper manages the books side of your inventory, you should always have two people other than your bookkeeper doing physical counts of your inventory. I recommend on at least a quarterly basis, depending on your volumes. Your bookkeeper can make adjustments in your accounting software to account for any losses, and this can help identify if anyone has been stealing from you. But the person making adjustments in the books should not be the same person to count.
If you handle in cash, the same thing applies. Have two people hand counting the cash at least at close of business. If you’re a nonprofit collecting donations, such as a church passing a plate around during service, you should have two people count the money, two people double checking the deposit slip, and hopefully a third person to actually do the deposit.
5. Have a standardized documented processes
Some people make the mistake of just taking a receipt from an employee and cutting a check. This is a no no. You should have a standardized reimbursement form so you can get an account of who you are writing the check to, what the purpose of the expense is, how much, and have a signature from the employee. If you have that already, awesome! But there is another step, which is to document that process. For every process you have to do with your money, you should have a written policy that your employees are familiar with. Same with invoicing, bill pay, inventory management, etc. This makes it easier to review records to search for discrepancies in the system.
6. Review your bank statements and reports
Your bookkeeper should be reconciling your bank accounts on a monthly or quarterly basis at least. This means that they are comparing what you or they have manually entered into Quickbooks with what the bank has said, making sure there are no errors and duplicates. I love doing this, but most business owners don’t (which is why I have a job). It’s tempting to completely let go of your bank statements in this process and just trust the bookkeeper, but you should at least be scrolling through your statement to make sure all the transactions are legitimate.
Similarly, your bookkeeper should be generating financial reports like your Profit & Loss (or Income Statement), Balance Sheet, and Statement of Cash Flows on the regular. Depending on their level of service, they may walk you through these in person or on a video call, send you a recorded video to walk you through them, or just send them to you in a secure way. No matter what delivery method, you should be looking through these and asking questions about anything that doesn’t look right or you don’t understand. And since you own the accounting software account, YOU can always go in yourself, run your own report, and click on the numbers that don’t seem to be adding up so you can see what transactions got you to that amount.
There is also a handy tool in Quickbooks called an Audit Log (In QBO, it’s Gear Icon > Tools > Audit Log. This will show you when your bookkeeper or accountant has logged in and keeps a record of everything they do. Take a look at it now and then, and if you have questions about anything, ASK. And pay attention to how they respond. A good bookkeeper shouldn’t react like a deer in headlights, and be happy to explain a transaction.
7. Trust your gut and your intelligence.
In addition to looking out for excuses, you should pay attention to how your bookkeeper makes you feel. (I know, all the touchy feely stuff). But it’s so important! Your bookkeeper should never talk down to you or make you feel stupid. Not only is this just, well, shitty to do, it’s also a sign that they’re trying to manipulate you into thinking you can’t live without them. Not everyone speaks the bookkeeping language, and that’s fine. Great, even, because it means we have job security. A bookkeeper should first and foremost be professional and respectful, and not be hard selling you or making you feel like you don’t know what you’re talking about. They also should not be talking smack about your business partner or other people in your work or personal life that might have influence over you. This is a classic trick of con artists – to make you feel separate or isolated from people so you trust them more than anyone.
8. Separate your bookkeeper from your tax accountant.
Okay, this one might be a little controversial, because MANY good bookkeepers also offer tax services. I want to be clear that I am NOT saying that everyone who offers this full service is scamming you. I AM NOT SAYING THAT EVERYONE WHO OFFERS BOOKKEEPING AND TAX FILING TOGETHER IS SCAMMING YOU. There, I said it twice. What I am saying is that it might be a good idea for you to have two different people on your finance team – one to do your bookkeeping, and one to do your taxes, and ideally people who don’t work at the same business. This is just a way to have two different sets of eyes on your books, to increase the chances that if something fishy is going on, it will be caught.
Conclusion
Listen, the vast majority of bookkeepers and accountants are decent, hardworking folx who just want to do a good job and help you and your business thrive. I don’t want you to think everyone is out to scam you. I don’t want you to be a paranoid hermit who is too scared to hire someone who will make your life easier. Con artists like Lizzie Mulder give us a bad name, and it makes me spittin’ mad. Unfortunately, many people who have been scammed are too ashamed to come forward, feeling that they’re stupid for letting themselves be taken advantage of. And that’s what a scammer counts on, so they can move on to their next target without suspicion.
But these people are not stupid. They were taken advantage of by someone who gained their trust. It could happen to anyone. And I don’t want YOU to be one of those people. If you do your research, set up your internal controls, and review things periodically to make sure all is on the up and up, that will significantly reduce your risk of becoming a victim of fraud or embezzlement. And the most important thing is to always follow your gut. If something doesn’t sit right with you, it probably isn’t. Don’t be afraid to speak up. Don’t let yourself be gaslit. This is your livelihood, your dream, your baby you are protecting, and you should protect it fiercely.