If I were to embezzle money from your company, this is how I would do it… 

As an outsourced accounting service, one of our key roles should be to ensure that we can follow the money. Understanding how to prevent embezzlement is key for every business, no matter the size.

We all know ‘cash is king’ when running your business. Every business operates in a somewhat typical manner.  We receive cash from our customers and make payments to our vendors. In that process, we have key personnel along the way to ensure the money is collected, paid and recorded in a timely manner.

What we don’t always realize is that our trusted employees, the ones we put in charge of helping manage the accounting, can be led astray.  The reasons for betrayal are too numerous to list. The bottom line is, they care more about themselves than your business.  

Stealing your money is as easy as 1, 2, 3

  1. Lack of internal controls
  2. Lack of owner review or oversight
  3. Lack of staying current on new technology to help prevent fraud

As an outsourced accountant helping small businesses, when taking on new engagements, I have been on the front line of detecting and finding fraud. This involves communicating those findings with the business owner(s) and helping to confront the perpetrator(s) and providing the supporting evidence for subsequent legal action.  

However, most fraud under $200k won’t ever see the criminal court system. There just aren’t enough resources to go after low publicity amounts. Therefore, as a business owner, all you can do is hope that the former employee(s) might ever pay you back. 

No business owner wants to go through this.  Not only could the fraud cause your business to fail, it will eat up a lot of time, energy and lost morale with your good employees. 

Perhaps the best mantra that any good accountant should hold dear to their professional reputation is to ‘Trust but Verify’.  It’s an old Russian proverb used throughout our lexicon but it very much applies to managing money.  


I ‘Trust but Verify’ for my clients by creating a good internal control structure that uses a myriad of preventative and detective controls, such as:

  • Segregation of duties involving cash
    • Never have one person doing the entire accounting/cash process
  • LIMITED Access to check writing and electronic signatures
  • Strong banking relationship for notifications of strange or large activity  – using ‘positive pay’
  • Owner involvement in all outlays of large cash transactions
  • Review of payroll by separate individual to ensure ties to source ‘3rd party’ reporting
  • Monthly reporting and review of debit and credit memos entered into accounting system

Finding out that an employee is stealing from you is never easy but the good news is that there are solutions to minimize your risks to avoid this.

Outsourced accounting companies can help create a good internal control structure, which not only helps prevent fraud, it also strengthens the reliability of your financial statements to give you peace of mind. 

In future articles, I’ll drill down into the types of controls that you can put into place to avoid embezzlement in your business.

Until then, trust but verify. 

Chris B. Daniels