Entrepreneurs have received another shocking reminder of the importance of knowing the ins and outs of their finances today with the case of a bookkeeper who stole $891,000 from her employer and spent it on designer handbags and scarves.
The bookkeeper was jailed for three years and nine months yesterday after bringing down a subsidiary of the Comunicom Group and, it appears, almost bringing down the whole company.
I am sure many entrepreneurs would feel lots of sympathy for a director of the company, Kate McNab, who was forced to sell two investment properties to help keep her business afloat.
Outside the court she told how the bookkeeper blamed financial discrepancies on other staff and tried play staff off against each other.
“She was very, very clever and she always had a good excuse when we asked where the money was going,” McNab said.
“We had no idea what was going on. Even now I wake up and think she could not have done this to us.”
It’s a nightmare no entrepreneur wants to go through and as we learned during the case of the Clive Peeters payroll officer who siphoned off $21 million from company bank accounts, even big companies can struggle to detect these crimes.
So while there are processes and systems that can and should be put in place to detect and prevent employee fraud – a big one is ensuring that no one person has total control over the books – a lot of it needs to come down to the entrepreneur’s instincts.
If you notice a staff member who deals with money and never takes holidays ask why not.
If you notice a staff member who deals with money living above their means ask why.
If you see an odd entry in the accounts ask about it and don’t stop asking about it until you have a satisfactory answer.
Some entrepreneurs take a hands-off approach to financial matters, feeling that they are better left to outside experts such as bookkeepers and accountants.
But business owners and directors need to develop the skill of being able to read financial reports and the courage to question anything they don’t understand.
Don’t worry about asking questions making you look stupid.
Complex finances lead to complex problems and entrepreneurs should demand that their finance people make the numbers easy to understand.
James was the editor and publisher of SmartCompany and LeadingCompany for five years. He is now the Australian Financial Review‘s companies & markets editor, and a former BRW editor.
