Who do you trust?


It was a Wednesday morning, and like many mornings I was starting my day by checking emails.  One from a long-time client caught my eye – the subject line was “memo regarding personal credit card charges.” As I read, I held my breath as the words spilled out on the page. It said “our controller made personal purchases with a company credit card. When asked about it she told the bookkeeper that she had mistakenly used the wrong card, and already paid the charges.  However, upon further research into the payments, it shows she paid these charges with a transfer directly from the business account.”  Oh no, how could this be?  “Maybe it’s a mistake,” I thought.

For the next three days I dug into their books, hoping and praying this would all be an innocent flub. As the next three days passed, and the little signs and weird transactions were revealed, my optimism gave way to serious doubt. By Friday evening I got the confirmation from the bank that I dreaded – the Controller had been issuing herself additional payroll checks that were deposited directly to her bank account.  After the transfer was made, she’d void the payroll record, and then enter bogus checks into the system under other people’s names so as to not draw attention to the fact that she was embezzling.  For the next two days I continued to dig. The total rose to $45K, and eventually to $55K. It turns out it she was not only using the payroll, but also AP checks to put cash in her own account.

This controller, new to the job in the last six months, had shown every indication of being completely trustworthy and reliable.  In fact, she had found several errors from the previous Controller and fixed them all. She seemed highly responsible and competent. Before hiring her, my clients had done everything I suggested.  They ran a background check and a credit report. They verified previous employment. Checked out her references.  They had done everything you’re supposed to do when hiring someone who is responsible for the money in your company.

So what had they missed? Nothing — in the hiring process, at least.

The problem wasn’t in the background check, but in systems and procedures already in place at my client’s company. By not having sufficient oversight, my clients set the scene that gave their Controller opportunity and ability to embezzle at will.

Because she was the person who made transfers for the payroll, she was able to transfer additional funds without question.  This allowed her to transfer money to cover fraudulent payroll checks.  Because there was not a practice in place for checking the payee on cleared checks against what was in the accounting software (part of a process done by an outside person), she was able to change the payee on checks after they were signed and deposit them into her personal bank account.  My client now has policies and procedures in place to ensure this does not occur again.

We want to see the best in people. At the same time, as business owners, we have a fiduciary responsibility to all our stake holders (partners, employees, customers), to be diligent in managing our company finances.

When you don’t pay attention to the ways employees are spending your money, they will assume that whatever they do is okay.  If you don’t say anything, they’ll convince themselves that it’s fine if they buy tools for themselves, buy gas for their personal car, pay for their phone or even for their car with company funds. Find it hard to believe? So did I – until I saw it happening again and again.

So what can YOU do? Here are steps to follow that can prevent this from happening to you, and keep your company from becoming another embezzling statistic.  (We were shocked when filing a claim with the police department, and found that there were 132 cases in front of ours!)

  • DO have someone other than the person cutting/approving checks reconcile the bank accounts. Make sure to get copies of front and backs of checks, and review each payee against what shows in your accounting software.
  • DO NOT let employees be signers on the bank account – especially if they are the ones cutting checks and reconciling the bank account.
  • DO NOT let employees make transfers between bank accounts. This should be done solely by the owner in small companies.
  • DO NOT pay credit cards on-line with a transfer; rather cut a check. This is the number one place people embezzle money in small companies.  There should be backup for all credit card charges attached to statement before you sign the check.
  • DO NOT sign checks without backup. Make sure to review the backup and see that the appropriate person has approved the expense.

 If this seems like a lot of extra time, energy and effort, you’re right. It is. Weigh that investment against the damages embezzlement can cost you, and it will be an investment you’re happy to make.

I also encourage you to read “How to Spot Accounting Fraud,” and discover the signs of embezzlement. EVERY time I’ve seen someone embezzle from a company, the signs were there.

I implore you – don’t give control of your company financials to a really competent and talented accounting person who offers to “unburden you” from the hassle of accounting.  That is warning sign number one!

I don’t want to give you the feeling that everyone is out to get you. They’re not. I do want you to know that to keep your company safe, it’s critically important that you trust and verify.

Now, make it an extraordinary day!


Author of the forthcoming book “The Profit Bleed” Your key to amazing business success!


  1. Deb

    Thanks Vicki,
    Great tips!
    I’m forwarding this to the children’s non-profit I vounteer as Chair of their Board. It’s mind blowing of all places this very same thing happened last month. Luckly it was caught by our outside auditors to the tune of $50k! We we’re all shocked to find this woman had done this before but it was not in her background ck because it was to be kept quiet if she paid it back. Unbelievable!

  2. Charles T. Wilson

    Thanks, Vicki, for telling this story. This is a high-priority “risk management” issue and I’ve seen it happen several times with small and mid-sized clients. The story is usually the same: new trusted person comes in, is friendly and helpful, hoodwinks everyone … then goes on and does it all over again because the business owner is too embarrassed to do anything.

    Often the problem is with background checks (the least expensive are not comprehensive), and/or with reference calls by inexperienced questioners wanting to complete a hiring checklist.

    I’d add one more to your list of recommendations: DO have a CPA or financial consultant audit internal bookkeepers and all accounts quarterly. This makes sure everyone is aware what’s important.

    Yes, owners and management must be clear and diligent and set the right example. And I firmly believe that all employees know when they are stealing – and that it’s not okay!

    • Vicki Suiter

      Thanks Charles – you’ve added some great points here!