Watch Your “Trusted” Bookkeeper – Embezzlement Happens

In the last 12 months, we have seen five deals fail to close because the bookkeeper was embezzling funds from the company being sold. Through the process of preparing the business to be ready to sell, we discovered inconsistencies in the financials that led us to the problems. In one of the larger deals, the accountant kept delaying the process by not sending us the required information. It turns out he was taking millions of dollars from the company and knew that this process was going to uncover his criminal activity.

Here are some of the results when the books have been cooked:
– Your business advisors don’t have a true picture of the business
– The seller has to stop and reassess whether or not to sell
(The seller might decide not to sell when he realizes the true profit of the business)
– Potential buyers back out because of the scandal
– The valuation of the business is lower than it should have been
– Distraction to the business being sold because of legal proceedings
– Potentially damaging to the reputation of the business

Periodically, you should have an external firm conduct an audit of your books to make sure that there are no hidden problems. They include fake vendor accounts, fake client accounts, additional phone and gas cards, or payroll numbers that don’t add up. We know companies that can help you with an internal audit, just call us and we will make the introduction!