I like it when people make my job easy. During one of my stints as interim CEO I suspected the CFO was enriching himself at the expense of the company. Once when he was out of the office, I sat down and looked at his computer. He was so organized that he had a spreadsheet right in a folder on his desktop that listed all the money he had stolen. It was so nice to not have to track it all down.
The truth is it generally works the other way around. Companies make it far too easy for thieves to do their job and to steal from the company.
I’m never too surprised to read about another case of embezzlement, but here was one with a twist. After an auditor with the National Credit Union Association noticed discrepancies in the financials of a small credit union in Hawaii in 2012, it led to an internal investigation. That led to a FBI investigation. Turned out, three employees were embezzling money. But it was hardly a conspiracy — none of the three knew the others were embezzling as well.
They managed to steal half a million dollars, each operating independently of the others. Heck, if they’d known they could have had a friendly competition — you know, first one to steal $250,000 buys lunch for the others.
The fact is I know of many instances where businesses have made it too easy for embezzlers.
Here are a few of the tips on how to protect your company from theft that you’ll find in my book “How Not to Hire a Guy Like Me: Lessons Learned from CEOs Mistakes.”
1. Give Your CFO or Corporate Controller a Break
I tell all my clients to give their CFO or corporate controller two consecutive weeks off every year. During that time, nose around a bit. Review deposits, talk to his assistant, check his mail. Banks have been doing this for years for good reason. If anything fraudulent is going on, this is a good time to detect it.
Once I was sitting at a CFO’s desk and took a peek at his mail. And there were his account statements from the bank in the Cayman Islands where he was depositing the money he was embezzling. Guess he was trying to save himself the cost of a PO Box.
Yes, most CFOs are trustworthy people. But I’ve dealt with enough who are not, and have cost their companies dearly, to know that it’s good policy to always verify your finances.
2. Tighten Up your Checks and Balances
Here are two things to remember: First, any place money or goods exist or move is a place that fraud or theft could occur. Second, no one is above suspicion.
Make sure to review expense reports even at levels lower than are generally reviewed. Make sure every expense-related check has two signatures and that the second co-signor takes the job seriously. Make sure all your checks and balances are in place throughout your company and working as designed.
3. Always Poke Around Your Books
Do spot checks of your ledger or QuickBooks to see where your money is going. Ask questions about vendors. Get a list of them and call a few of them to make sure they really exist.
Remember the $1.48 million embezzlement from Woodruff Arts Center? That was done by an employee who set up a bogus vendor. Guess who was cashing those checks?
Whether it’s one employee or three, don’t let embezzlement happen in your company.