CASE STUDY Significant Employee Theft

LogoBranders owner Terry Southern wasn’t thrilled with her Controller, but she had no idea she had been systematically stealing from her for the past 5-years.

Typical Challenges

Our Fractional CFO service was engaged to perform our standard Exploratory Review of the finance department and report back on our findings. This detailed review of Syncore and QuickBooks revealed numerous typical challenges including bank reconciliations and month ends that were out of balance. Obviously, the financial statements were not to be trusted, but more concerning was the lack of balanced bank reconciliations which meant money could be missing. Further investigation also revealed a suspicious loan account on the balance sheet that couldn’t be explained.

Serious Problems = Deeper Dive

Our team visited LogoBranders head office in Alabama for 2 days to perform a hands-on forensic analysis and by the end of day one had proof that the Controller was stealing money two different ways. She was forging checks, cashing them, and then deleting the transactions from QB. While we feel the ability to “delete” transactions in any accounting system is a dangerous flaw, our team knew about the QB “Deleted Transactions Report” and was able to prove the theft. Additionally, the Controller oversaw payroll for over 40 employees and gave herself a nice raise which was easy to miss unless you were looking for it.

The Controller was immediately fired, and the authorities were called. Our team assisted in the hiring and transition to a new Controller and now performs the month end process via our FCFO service that provides a bank rec, balanced month end entries, trustworthy financial statements, and oversight of the finance department. “It’s a good feeling to know that someone like Alexis Aubry of Promo Consulting is keeping tabs on my money to make sure this never happens again. Her experience with the promo industry, combined with her finance, Syncore and QB knowledge, is a real asset to our company”. Terry Southern Parker, President

Suggestions for Improvement

This case study shows the importance of monthly bank reconciliations. Having your Controller tell you “The bank rec is done” isn’t good enough to prevent fraud. As an owner, you need to put your eyes on the two documents yourself and see that the cash balance on your bank statement matches the reconciled cash G/L account in QB to the penny. Do this every month for every bank account you have – it only takes 2 minutes!

Unfortunately, employee theft is a real possibility as you grow and stop managing the daily financial oversight tasks yourself. You might want to investigate crime & fidelity insurance with your local insurance agent as it’s relatively inexpensive. Let’s hope you never need to file a claim!

Self-oversight of business finances by sales-oriented owners isn’t always the best solution. Getting a 3rd-party finance expert that knows the industry to provide independent oversight can be a good investment to protect your hard-earned money!