Is Your Bookkeeper Stealing From You? 4 Red Flags (And How To Prevent Them)

Updated in 2023

Now, let’s be real. The odds that your bookkeeper is stealing from you are pretty low. If you take the time to properly vet all of your candidates, and keep high standards and internal controls, you should be OK. 

Still, there is always a chance that someone you thought you thought you could trust will shock you. 

I have actually caught a few bookkeepers red-handed over the years, both in my corporate career and my personal life. It’s definitely NOT a pleasant discovery. But in an imperfect world, alas, it happens. 

My real-world experiences have indeed sparked an interest in what I call “forensic accounting.” Trust me, through this pursuit I’ve learned a lot.

One important fact has to do with liability, and who is responsible when stealing happens. 

Now, discovering that someone you trusted STOLE from you is bad enough. What’s even worse is that when they do, YOU are the liable party. That means you need to step into responsibility. The IRS does not consider “I didn’t know” to be a strong case.

This means that as the business owner, you need to step into the role of the responsible party, and keep tabs on what’s going on behind the scenes with your money.  (I have a course that’s perfect for you if you are ready to feel more informed about how to manage the finances of your business as the CEO, keep reading for more details.)

Now, let me be clear. I’m not here to tell you that you need to be suspicious of everyone and scrutinize your team’s every move. What I am saying is that there are certain red flags to look out for, and I’m going to share them here.I’ll also share a few tips to help prevent internal fraud issues in the first place.

All of what I’m offering here is meant not only to protect you and your business, but also your team. Remember that it all goes both ways with employees, contractors, AND clients. Mutual trust is always required. 

When you set up the proper internal controls to reflect full transparency in your company, it benefits everyone. We’ll talk about how to do this for your company, too!

If your bookkeeper is not very good at communicating, or is lagging behind on tasks that doesn’t necessarily mean they might be stealing from you either.

I’ve mapped out the top 4 red flags that your bookkeeper might be stealing, lets take a look together.

Some hints your Bookkeeper or someone close to you *might* be stealing from you:

1. They hoard all the assets. In other words, they are in complete control of the money and access to logins. You aren’t really sure where the money is going outside of some transactions you see in the checking accounts, or maybe in a few reports. And when you ask your person for the login info or tell them you want to take control again, they get a little uneasy.  Or tell you that this isn’t necessary . While some bookkeepers like to try and keep job security, transparency is the only true way to create it. Sharing is caring!
2. Things aren’t adding up (or subtracting) properly. Here’s an example I came across a while back. A client’s checking account reflected that a credit card was being paid each month. But after a few months, the client noticed that the credit card bill wasn’t going DOWN. Turns out the bookkeeper added the correct vendor name, BUT, she was also paying her own personal credit card with the same name, NOT the client’s card. So she was actually using a client’s money to pay personal bills, in essence she was stealing company funds to pay off personal accounts masking them as “business payments”. 
3. Strange vendors and small amounts.  Sometimes you’ll come across strange vendor names on your bank or credit card statements. They often show up as unrecognizable names, and the charges are in small amounts. These small charges here and there frequently go unnoticed if they are under $10 or $100 each. So be sure to look for any vendor names on your statements that seem strange to you or multiple small transactions under the same or similar vendors.
4. Cash flow is WAY off, and they can’t explain why. To further the point on red flag, fake charges from fake vendors also tend to add up. That could lead to your cash flow reports being WAY off. If too many of these slip through the cracks, it can lead to cash flow discrepancies. Your P&L will nearly never match your bank account if this continues. If you see a pattern of a high P&L with low bank balances, it’s time to ask for an explanation–and more specifically, a cash flow report and general ledger (GL) report. This way you can trace the unknown charges.

So now, the tough part–if you discover any of these anomalies and you have your suspicions, what do you do? Here’s my best advice:

If you have a *hint* that your bookkeeper might be stealing from you, don’t address them directly just yet. First, try to get the software admin rights and change bank logins ASAP. Then, get another opinion. Hire an impartial third party to review your accounts and check it out for you. 

Finally, if your suspicions were founded and you caught them red-handed, file a police complaint.

Now you know some of the most significant bookkeeper red flags. You’re probably wondering now what to do to stop these situations before they start. That’s where solid internal controls come in!

As far as how this extends to my clients, they are either admins or have full access to ALL assets. I encourage a “strong audit trail” often, like receipt forwarding. We also have policies in place so that if a client decides we’re not a good fit and they wish to terminate the professional relationship, they won’t be penalized. 

We all bring a certain level of expertise to our spaces, and we’re humans. So ya know, mistakes happen from time to time. These can be significantly minimized when we have a team of experts working together. 

Now, here’s the thing. It’s not like all of us are pointing finger guns at each other like a cheesy western, telling one another not to make a move. This system builds trust and confidence within our teams AND our clients. That’s the beauty of it!

So once again, it’s probably not likely that your bookkeeper is stealing fro you. Still, it’s vital to set some solid internal control policies for everyone’s benefit. Get the help of a third party reviewer if you suspect anything before you confront someone.

If you want to build the financial confidence to either learn bookkeeping yourself, or delegate with confidence as the CEO not the everything Entrepreneur, our upcoming DIY Finance course is perfect for you.

I will show the ins and outs of what it takes to look at your books from a high level and ensure you are compliant and how to make sense of the information available, like how to read financials or catch cash flow variances.

This course is coming in 2023, so be sure to sign up for our email list to get notified when it does! You can do that right HERE (and get yourself a FREE Tax Planning Checklist while you’re at it!).

We’re here to help, so let us know what you need! 

Until next time…

Love, Light, & Money, Honey.

Kaylee