Solomon Bruce Consulting Blog

Friday, May 27, 2016

Why Do You Pay The Invoice?

         The news has been full of articles that address inside embezzlement in a company.  The bookkeeper, the office manager, the comptroller are all individuals who have been cited for embezzling company funds—often without the knowledge of the owner or other ranking corporate officials.

            A former car dealer told us that when he operated a car dealership, he opened all the mail and signed all the checks!  Now, drastic and tough?  Well, we don’t think so.  Knowing what is going on in your business is the key to a successful business.  Knowing what is being bought, how much is being paid and what the product is being used for is important in any business.  Now, this method will probably not be viable if the company has sales in excess of $600 Million dollars a year.  However, anything less than that in sales, this method works.

            The car dealer went on to say that he belonged to a network of car dealers which regularly got together for mentoring and advice.  At one of the sessions, the moderator gave many of the attendees’ checks for $75 to $100.  He wondered why he did not receive one.  The answer, his firm did not pay a bogus invoice that had been sent to all of the dealerships.  The check was the amount of the bogus invoice which was paid by some clerk, unwittingly, in most cases.

            This is a great illustration of good internal controls in the company.  If the company has good internal controls, money loss is usually reduced to zero and the negative publicity that occurs with embezzlement negated.

            If you don’t sign the checks, find out who does.  Ask to see each invoice and the amount paid.  You may be surprised at the results you find.  They may not be what you had imagined.  You may further find out that there is “some leak in the till” that you were unable to identify. 


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