The Dangers of a Trusted Bookkeeper

Many small businesses have unknown threats

So your business has a wonderful bookkeeper, Joan Hardison. Just last week you told your banker, “Joan does such a good job, I don’t have even think about my bookkeeping.” But does your trust create potential dangers–some that might be significant?

Dangers of a Trusted Bookkeeper

Bookkeeping Password

Is Joan the only person with the password to your bookkeeping software? If yes, why? Oh, she’s trustworthy. I see. But can she control when he dies?

If Joan is hit by a bus and passes from this earth, can you access your bookkeeping information?

If your company has years of bookkeeping information and Joan is the only person with the password, then you may lose it all. Yes, you have the printed copies of your financial statements, but the details of your financial life may be lost forever. 

Intentional Destruction of Bookkeeping Information

Here’s another threat. Joan becomes angry.

Well, now she can intentionally destroy your financial records. In some systems, this is as simple as hitting a delete key. So provide the bookkeeping password to multiple people (if the system does not allow multiple users). If a bookkeeper leaves, remove that person from the system as soon as possible. Sabotage is an ugly thing. 

Also, consider the potential for harm if your bookkeeper is the administrator in your bookkeeping software. He or she controls who gets in and who can’t. It may be wise to make someone other than the bookkeeper the administrator, or–if the system allows–set up two administrators. Main point: Don’t allow one person (the bookkeeper) to control everything.

Additionally, back up your data, or use a cloud service that does this for you. 

The Threat of Theft

Oh, and here’s one more danger: Theft.

Many small businesses trust their bookkeeper too much, not reviewing what the person is doing. This is a recipe for fraud.

If your bookkeeper prints your checks, then she can write checks to herself, can she not. And if she alone reconciles the bank statement, then you really have a problem. She may be the only person that sees cleared checks. If you’re the business owner, you may be thinking, “But I’m the only authorized check signer.” Good luck with that. I’ve seen plenty of forged checks.

As I tell my clients, “Trust your mother but cut the deck.”

Too many small business owners fail to review the work of their bookkeepers, and these businesses often are not audited. Since the bookkeeper knows no one is watching (and that no one will), it’s easy to steal. What’s the solution?

While not a silver bullet, have the bank statements mailed to the small business owner (or someone other than the bookkeeper). Have this person open the bank statements and review the cleared checks. Thereafter, provide the bank statement to the bookkeeper. This simple step can save you. Now, the bookkeeper knows someone is paying attention, and your risk of theft is diminished. 

Summary

So, if you have a trusted bookkeeper, great! But you still need to do the following:

  • Provide the bookkeeping password to more than one person
  • Backup your bookkeeping information
  • Have your bank statements mailed to someone other than the bookkeeper

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