Fraud and QuickBooks

QuickBooks is a great Accounting program that provides tremendous value to Small Business owners for a very reasonable cost. In fact, it has 85% - 90% of the Small Business market. However, it can be very effective in allowing someone to steal your money, unless you take steps to prevent it.

So how do you prevent this?

The first thing you need to do is to understand the concept of Internal Control. Basically, you want to segregate duties so that no one person controls the whole process. You NEVER, NEVER want to allow someone (in many cases, the bookkeeper)to have physical custody of the asset and total control of the record keeping of the asset.

In other words, where there has been embezzlement of funds, the bookkeeper has been able to write and sign checks, make deposits, make the entries into QuickBooks and reconcile the bank account. A CPA friend of mine had a client, whose bookkeeper had those abilities and she stole $740,000 over the period of about 3 or 4 years.

Probably one of the most effective things that you can do is to have someone other than the bookkeeper (preferably the Business Owner) reconcile the bank account on a monthly basis. That way you can stay on top of your bank account. In future posts, I will discuss other ways you can use QuickBooks to prevent Fraud.