Did you know that bookkeeping dates back to 4000 BC, and was commonly used in its current form in 1494? It’s an essential function of a successful business. Generally speaking, the role of a bookkeeper in a smaller organization is to provide you with the tools necessary for you to monitor the fiscal health of your organization, and to help you see where to focus your attention. While the bookkeeper handles the day-to-day finances for the business, the accountant usually is the one who prepares the federal tax returns for the business. These lines often get blurred, however, especially when one person is performing both of the responsibilities. This dual role can be a problem though, due to the vast difference between bookkeeping for tax purposes and bookkeeping for business success. Oftentimes, business owners put off hiring a bookkeeper for many reasons, but one such reason is due to lack of trust, and rightfully so, as there is an abundant amount of crooked bookkeepers. Wistfully, not only do unethical bookkeepers betray people’s trust, but they also tarnish the reputation of thousands of ethical bookkeepers. Sound Bookkeepers is the winner of the prestigious BBB torch award for ethics for 2021, so I’m writing this to help you discover whether the bookkeeper you have is one you should keep, or if you don’t have a bookkeeper now, to help you hire one you can trust.
There are many stories online about bookkeepers embezzling which can be found by a simple google search. A bookkeeper in Milwaukee was sentenced to 3.5 years in prison for stealing from the person whose books they were doing. In the story, it says she was forging names on the checks she wrote herself and stole over $225,000. In another story, a jury took six hours to convict the bookkeeper of embezzling $12,525 from the Little Lambs Preschool in Mendocino County. So one might think, why is it that we would give somebody who could potentially be a criminal so much control over our income and assets in the first place? This is a fundamental problem in the world of business. It is often said not to give control of your money to someone you don’t trust. And, if you do trust them, then don’t. In the Milwaukee case, the business owner was close friends with the embezzler, and as such, never suspected anything.
For a moment, I would like for you to consider that your business is separate from you. It’s your baby, your golden goose, and as the owner, it’s your responsibility to protect the company until it’s mature enough to survive without your constant monitoring. You can’t risk letting anything happen to it, and that means making sure people can’t steal from the company too. It takes a lot of work to protect your company, just like you must protect your house against being burglarized. Locking the windows and doors is an easy and obvious solution, but it doesn’t guarantee to prevent theft, it just inhibits it. Armed guards are probably more than most of us need, although it’s closer to a guarantee than simply locking the door.
Similarly, in bookkeeping, it is very hard to prevent embezzling. When I was in the tax business, at least half our clients were business owners who owed 941’s and personal tax from unpaid self-employment tax. When I would ask a business owner how they ended up owing all of this money to the IRS, commonly they would tell me it was the bookkeeper embezzling or not filling things correctly.