Bookkeeping Workbook For Dummies
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Every business owner faces the possibility of theft or fraud. Too often, business owners find out about an employee pocketing some assets when it’s too late to do anything about it. Even the most loyal employee can be driven to steal if their personal financial pressures become too great.

There are four basic types of financial fraud a business owner may face:

  • Embezzlement: This involves the theft of funds by a person who actually has control of the funds, such as a bookkeeper or comptroller.

  • Internal theft: This involves the theft of company assets by employees, such as office supplies or merchandise on store shelves.

  • Payoffs and kickbacks: This involves the acceptance of payments by vendors for sending business their way.

  • Skimming: This involves pocketing some of the company’s sales receipts and not recording the revenue on the books.

Your best defense against theft and fraud is to put up barriers to discourage it. You do this by dividing staff responsibilities to reduce the possibility and opportunity for theft and fraud.

Here are some key tips for controlling your cash and minimizing theft and fraud:

  • Separate cash handlers: Be sure that the person who accepts the cash is not the same person who records the transaction in the books.

  • Separate authorization responsibilities: Be sure that the person who authorizes a check is not the same as the person who prepares the check. If possible, a third person should be the one to sign the checks. That way three people would have to collude to steal money using a company check.

  • Separate bookkeeping functions: Don’t put too much authority or trust in one person (unless that person is the business owner).

  • Separate operational responsibility: Be sure you have one person who accepts the cash transactions and a second person who enters those transactions in the books. For example, the person who handles the cash register should not be the one who makes the bank deposit.

  • Separate financial reporting: Be sure that the person who prepares your financial reports is not the same person who is responsible for entering the data day to day in your books. Often, an outside accountant is responsible for using the data entered to prepare the financial reports if a business does not have an accountant on staff.

About This Article

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About the book author:

Lita Epstein, who earned her MBA from Emory University’s Goizueta Business School, enjoys helping people develop good financial, investing and tax-planning skills.
While getting her MBA, Lita worked as a teaching assistant for the financial accounting department and ran the accounting lab. After completing her MBA, she managed finances for a small nonprofit organization and for the facilities management section of a large medical clinic.
She designs and teaches online courses on topics such as investing for retirement, getting ready for tax time and finance and investing for women. She’s written over 20 books including Reading Financial Reports For Dummies and Trading For Dummies.
Lita was the content director for a financial services Web site,, and managed the Web site, Investing for Women. As a Congressional press secretary, Lita gained firsthand knowledge about how to work within and around the Federal bureaucracy, which gives her great insight into how government programs work. In the past, Lita has been a daily newspaper reporter, magazine editor, and fundraiser for the international activities of former President Jimmy Carter through The Carter Center.

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