Whenever we see one of our contractor clients on the road towards a problem, issue or disaster, we immediately raise an alarm. We are judicious about doing this, and when we say there is a potential problem, our clients know we are serious.
Contractors by nature are tough, resilient and have a tremendous amount of grit and determination to succeed. The good ones are not prone to react in a hasty or rash manner at the first sign of trouble. This is just one of the many qualities I sincerely admire about these hardworking men and women.
A Google search for Bookkeeper Embezzlement Construction Company will return over 100,000 results. This is, always has been, and will continue to be a major headache. Unfortunately, in some cases, it is the direct cause for construction company owners to file business and personal bankruptcy.
For Example: the case of a 54-year-old woman, a family friend, who stole more than $852,000 from 2007 through 2013 before being caught. For the full article, read http://www.equipmentworld.com/bookkeeper-charged-with-embezzling-852k-from-pa-construction-company/
These embezzlers come in every race, creed, color, gender, and age. There is no definitive profile and, unfortunately, no absolute way to know which contractor bookkeeper is an embezzler -- until they have been caught and convicted. If you do not perform extensive background checks, you may never know that you have a crook working for you until it’s too late.
Just because you catch a bookkeeper embezzling funds, don't think for one minute they will always be punished and made to pay you back. You have to understand, for the most part, in the eyes of the public, employees are viewed as poor innocent victims of brutal and greedy business owners.
It is further emphasized and reinforced by the media, television and movies, that most of the villains are businessmen and women. Just understand this Randalism, "We live in a world of what is, not what should be."
For instance, take one particular case where a bookkeeper was working for an automotive company. She was suspected of embezzling tens of thousands of dollars, but only admitted to stealing $10,000.
She was put on two years’ probation without any jail time, and ordered to pay $50 a month in restitution; however, she claimed that, due to medical issues and financial hardship, she was unable to pay anything.
Understand the Employee Theft 10-10-80 Rule: Discovered over many years of experience and firsthand observations by auditors, accountants, fraud examiners, and anyone involved in detecting employee theft.
Ten Percent of all employees, including bookkeepers, will steal in a variety of ways. They will loot your office supplies and petty cash, and take graft, kickbacks and payoffs from your suppliers, vendors and subcontractors. The amounts can add up to hundreds of thousands -- or even millions -- of dollars. And they will do it regardless of how many security systems are in place. Why? They lack integrity, and have a "taker's" entitlement paradigm that states: "It is Better to Take Than to Make". They cannot be stopped, only caught! And they can only be caught if you have systems in place and you can convince the criminal justice system to take action.
Ten Percent of all employees, including bookkeepers, will never steal because they have integrity and a "producer's" paradigm that states: "It is Better to Make Than to Take". In the end, these are the people who will add so much value to your company you cannot help but reward them with more money, benefits and recognition. If you do not, they will be recruited by your competitors!
Eighty Percent of all employees, including bookkeepers, will steal if they feel certain they can get away with it and if circumstances allow for it. This is also due to a lack of integrity, and a sense of "Redistributing the Wealth, But Not the Work or the Responsibility."
Be Suspicious When Your Bookkeeper:
• Asks for signature authority on your checking/savings/payroll accounts.
• Has a lifestyle that seems above what they are earning.
• Takes records home to work on, or they want to work in the office when no one is around, (Fraudulent activities are easier when nobody is around.)
• Refuses to take a vacation.
• Gets defensive when you or your CPA asks questions.
• Has access to your credit/debit cards.
• Receives mail-order packages at work.
• Has QuickBooks in a complete mess and you cannot understand any of it.
• Tries to explain away delinquency tax notices.
• Insists on picking up the daily mail.
• Is the primary contact for your company's banks, auditors, creditors, etc.
• Misplaces payroll receipts, deposit records, supplier letters and estimates.
• Makes the bank deposits -- and they seem to be too small.
• Shows signs of a drinking, drug, or gambling problem or family financial problems.
• Suggests they could save money by getting rid of the outside accounting firm.
• Gets angry when you ask for a QuickBooks report.
• Tries to blame the previous bookkeeper or outside accounting firm for messy QuickBooks.
• Does not get along well with other employees and staff members.
• Pays bills with cashier’s checks - when you look it up on the internet, it will only show as a withdrawal.
Steps Construction Company Owners Can Take To Help Avoid Bookkeeper Embezzlement
Outsource to a Professional Contractors’ Bookkeeping Service that has a contractors’ bookkeeping services system in place:
1. Make certain they do not collect your money, make bank deposits or pay any bills or taxes.
2. Make certain they do only the bookkeeping, including payroll processing, quarterly tax reports, invoicing, pay applications, and bank reconciliations. They must provide you with online access to your QuickBooks For Contractors, and a separate 24/7 web-based financial reporting tool so you can generate job costing and financial reports anytime you want.
3. Make certain they have qualified construction accountants and construction bookkeepers on staff.
4. Make certain they are U.S.-based. Although there are many services that can be outsourced offshore in foreign countries, contractor bookkeeping services is not one of them. It may be cheap in the short run; however, in many cases, construction company owners have cost themselves a lot of money -- in most cases, many times what it would have cost to have us handle their contractors’ bookkeeping services.
5. Make certain they have a professional office, not somebody's home where there are little or no controls on who has access to your contracting company’s records. You would be surprised if you knew how many wives and girlfriends of contractors take on other contractors’ bookkeeping. Information about your bids, estimates, profit and loss can easily find its way into your competitors’ hands.
About the Author:
Randal DeHart, PMP, QPA is the co-founder of Business Consulting and Accounting in Lynwood, WA. He is the leading expert in outsourced construction bookkeeping and accounting services for small construction companies across the U.S.A. He is experienced as a Contractor, Project Management Professional, Construction Accountant, Intuit Pro-Advisor, QuickBooks for Contractors Expert and Xero Accounting Specialist. This combination of experience and skill sets provides a unique perspective which allows him to see the world through the eyes of a contractor, Project Manager, Accountant and construction accountant. This understanding is what sets him apart from other Intuit Pro Advisors and Xero accountants, to the benefit of all construction contractors he serves across the U.S.A. Visit http:////www.fasteasyaccounting.com/randal-dehart/ to learn more. Randal is a Certified PMP (Project Management Professional) with several years of construction project management experience. His expertise is construction accounting systems engineering and process development. His exhaustive study of several leading experts, including the work of Dr. W. Edward Deming, Michael Gerber, Walter A. Shewhart, James Lewis and dozens of others, was the foundation upon which our Construction Bookkeeping System is based, and continues to evolve and improve. Check out our Contractor Success map Podcast on iTunes and Follow Randal on Google+.