An extra $22 million for your pockets! 3 simple tips to avoid accounting fraud
Nationally renowned Comedian, Steve Harvey, paid $22 million in back taxes due to both personal and employee neglect. (Publicly admitted he wasn’t paying attention.)
An interview of Steve Harvey went viral on Instagram, as he revealed a former accountant swindled him out of $22 million dollars. His long time accountant died leaving an employee of the accounting firm to take over Steve Harvey’s file. Steve Harvey receives a call from the new employee, stating, “We have a problem”.
The employee proceeds to reveal that she had found piles and piles of unfiled tax returns and uncashed checks to the IRS under the desk. The former accountant had obviously revealed to Mr. Harvey how much he’d have to pay in taxes and I’d like to think that Mr. Harvey agreed to the amounts. As he stated during the interview, “I saw the amounts clearing the bank account, so I thought it was getting paid.”
Later, Mr. Harvey learns the accountant was never paying the taxes he owed, rather he was writing the checks to himself in the same amount of the tax bill and cashing them to his personal account; never to ever file his taxes or pay the IRS.
How unsettling is that? Mr. Harvey hired an accountant he felt he could trust all to learn the accountant was a fraud and unethical. There are a numerous of ways you can position your business to avoid fraud. This article will suggest 3 simple steps which should be easily attainable for any business owner.
3 Simple Tips to Avoid Accounting Fraud
BE RESPONSIBLE: Hire a Bookkeeper
BE SURE: Set-up Recurring Meetings
BE SECURE: Use Verification Codes
Explained in detail below.
It is understood that a lot of people will read this article and immediately associate the incident solely on tax preparation. And don’t get me wrong, maybe about 5% of the problem is. Simply because the incident derived from un filed tax returns. In order to “pay your dues” as both a working citizen and business owner, tax payments are required to both the state and federal government.
But the bigger issue is a matter often missed in the industry of finance, BOOKKEEPING. This is a bookkeeping issue.
TIP #1 - BE RESPONSIBLE: HIRE A BOOKKEEPER
Unfortunately, I cannot single out Mr. Harvey for his negligence with his Tax Accountant. But I am pretty sure and this is an assumption that Mr. Harvey must’ve neglected to hire a bookkeeper.
Bookkeeping is defined as the management of all financial transactions that enter and leave a business. Bookkeepers are who make it possible for you to file your taxes. They provide the financials to your tax accountant. The CPA can overlook and certify those financials. Additionally, bookkeepers have the ability to pay your bills, invoice your customers, process payroll, set up company budgets, provide financials (PnL, Balance Sheet & Cash Flow Statements, etc.) and so much more. A bookkeeper can catch fraud very easily with consistent account review, categorization and a month-end closings.
They are vital to the sustainability of any business and at large an oversight across the board of all industries. Some Bookkeepers are Accountants as well and may or may not be Certified. Most Certified Public Accountants (CPA) focus solely on tax preparation as Bookkeeping is extremely tedious. Most CPA’s do not have the time or do not want to perform bookkeeping tasks, rather they’d like to focus on the bigger picture; such as audits, tax preparation and tax planning. Your bookkeeper is who provides the tax-preparer with the financials enabling you to file your taxes. Bookkeeping, is the most underserved profession in the business and finance industry. But also, the most important need in all businesses. Get you a bookkeeper.
TIP #2 - BE SURE: ALWAYS CALENDAR RECURRING MEETINGS
Once you hire a bookkeeper or an accountant be sure to set up regular meetings no less than 2x per month. If you travel a lot, have the meeting over the phone or even via video conference. If you miss a meeting, make it up and still require your bookkeeper to send the financials for review. REVIEW IT. LOOK AT YOUR FINANCIALS AND ASK QUESTIONS. Do not neglect it.
Require the meetings to include financial overview. Meaning, a clear look at all transactions that flowed in and out of the company for the month. All of the transactions should match all bank and financial insitution accounts attached to the company. Not one transaction should lack back-up and/or supporting documentation. You should ensure your bookkeeper always has receipts, W-9’s, invoices and/or contracts.
At my firm (GYSIO Business & Bookkeeping Services) we require our clients to have weekly meetings with us. We ensure to inquire of all operations, traveling schedules, new businesses, etc. enabling us to ensure that the transactions we are managing are in-fact coming from the client. We love our clients and have a great relationship with all of them.
Weekly meetings allow for the client and bookkeeper to catch fraudulent transactions much quicker than normal. So, be sure to not leave your accountant or bookkeeper alone for too long. It is imperative for both the client and bookkeeper to be accountable to one another. This builds good business relationship and trust. Additionally, you as the business owner, will learn from the recurring meetings, if the bookkeeper is good fit for your or not. Do it. Set up recurring meetings you will not regret it.
TIP #3 - BE SECURE: VERIFICATION CODES
Folks, Get Yo’ Stuff in Order! It’s a new age, with advanced technology not one business owner should experience fraudulent acts from their accountant and/or bookkeeper, not even from themselves. Oops…did I fuss a little?! I did. I think you may’ve needed it.
Listen, everything, for the most part, has evolved to automation. Technology across all industries has evolved like crazy! Most accounting softwares allow for bank integration enabling your bank transactions to immediately download into your software. Additionally, most business management and operations software allow for more than one user. Enabling you to add team members which includes your accountant and/orbookkeeper. Allow the bookkeeper the proper permissions to complete all tasks. But only give other team members, including your Tax Accountant viewing rights.
There is no need for team members other than yourself and your bookkeeper to have access or rights to make changes to your finance management softwares. Also, in most to all cases, softwares allow you to set up security verification codes. What does this mean?
Due to the high level of security fraud and hacks of the cyber world, software and app users can set up verifications for mostly all interactions within that software. Depending on the type of software, you can require a verification code for just about anything. Some banks now allow a verification code just to make a transfer from one account to the other.
It is typical practice for a bookkeeper to have access to your bank and financial accounts. This is what you do, set up a verification code on all the accounts the bookkeeper is utilizing. When you do, every time the bookkeeper logs in, you will have to give them access. Every time a transfer is made you will have to give them access. When you receive the code, this should prompt you to ask the Bookkeeper what task they are performing, if you don’t already know.
This is just a simple step to keep an eye on your shit and not neglect it. Take precaution and don’t allow the unethical to cheat you out of your hard earned money. Rather keep that extra 422 million for yo’ pockets!
By Shamelle Reveter, CEO of Get Yo’ Stuff in Order Business & Bookkeeping Services
If you are in need of a bookkeeper, please contact info@gysio.org.
Bio: Subject Matter Expert, Shamelle Reveter of Get Yo' Stuff in Order Enterprises holds 18 years of business and accounting experiences in various business industries with a special emphasis in entertainment. As an Accountant and Personal Development Coach to notable working performing artists, entrepreneurs & start-ups; her efforts continue to make a strong impact on the business and lives of her following.
Booking Info: 800-277-7319 or booking @gysio.org