Professional pickpockets: protecting your company from embezzlement.

• Author: Spendlove, Gretta
• Position: Legal Briefs

"ABOUT ONE SMALL BUSINESS owner in four is getting his pockets picked by his most valuable asset--his own employees," reports a recent Salt Lake Tribune article. "A recent survey conducted for Intuit found that 24 percent of the 500 small business owners surveyed have caught their employees stealing from them. An embezzling worker loots on average $127,500 from a small business."

Prevention

"The simplest thing that a small business owner can do to avoid embezzlement is to open and review the bank statement," says Guy Morris, Salt Lake City CPA. "This act would catch 75 percent of the embezzlement that we see." Morris recommends asking that the person receiving the mail deliver the bank statement each month, unopened, to the business owner. "Quickly scan the checks for correct signatures and for payees that you recognize. Review the statement itself to make sure that you understand all transfers out of the account.

"Carefully let it be known to others, especially those handling the checks and receipts in the company, that you are doing this," Morris continues. "Say something like, 'I review the checks and bank statement just because the bank might mess up.' Or, quote your accountant, saying that he instructed you to do this to help keep the honest people honest."

"Small business provides an easy target for embezzlement, because owners often trust one staff person to do everything," comments Karen Summerhays, another Salt Lake City CPA. "The owners aren't paying attention." Summerhays suggests the following controls to prevent embezzlement:

* Make sure the person making deposits isn't the one who is responsible for accounts receivables, invoicing or opening bank statements.

* Don't allow a signature stamp in the office. The embezzlement risk is simply too high.

* Have all employees take at least one week of vacation per year.

* Have an independent person (one who doesn't handle other accounting functions) open the mail. That way, it's easier to spot such things as payroll taxes that haven't been paid in a year because the money has been siphoned somewhere else.

* Regularly review accounts receivable and accounts payable reports for a "smell test," looking for things such as a vendor you don't recognize.

Paul Durham, Salt Lake City...