Small Business Embezzlement - Common QuickBook Asset Manipulation Tricks | Worgul, Sarna & Ness

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Small Business Embezzlement – Common QuickBook Asset Manipulation Tricks

Thanks to its user-friendly design and robust capabilities, QuickBooks has become an indispensable tool for many small and medium-sized businesses. Unfortunately, its ease-of-use also makes it easy to manipulate. Using QuickBooks to embezzle funds is surprisingly common.

If you’ve been accused of using QuickBooks to misappropriated company funds or charged with embezzlement in Pittsburgh, contact >Worgul, Sarna & Ness, Criminal Defense Attorneys, LLC today. We can help you through every part of the legal process to bring about a favorable resolution. Call our criminal defense law firm today at (412) 281-2146 or fill out our online contact form.

What is Embezzlement?

To understand how QuickBooks is used in embezzlement crimes, it’s first helpful to recognize that embezzlement includes more than just taking cash from your employer. Embezzlement can be charged in any situation where an employee misappropriated money or other property entrusted to them by their employer.

Embezzlement can include:

  • Inflating invoices or sales records to generate higher commissions
  • Claiming false expenses
  • Diverting funds from corporate accounts to your personal account

If they have the right privileges, QuickBooks allows users to easily manipulate invoices, ledgers, and even checks to embezzle money from their employers.

Creating Fictitious Vendors

A common embezzlement scheme involves creating fictitious vendors that allow the user to divert funds to their account. If the user has access to the purchases and accounts payable function, they can set up a fictitious vendor. They then create an invoice for goods or services and then uses corporate funds to pay the vendor. Obviously, the vendor doesn’t get paid – the funds are diverted to the embezzler.

“Print on Check” Schemes

QuickBooks allows users to print a different name on the check than the actual vendor by way of the “print on check” feature. As a result, the user could print a check made payable to themselves, while the payment in QuickBooks would appear to be to a legitimate vendor.

Altered Payee Schemes

This is similar to the print on check scheme. The user alters the name on the check in order to divert the funds from a legitimate vendor. This may entail changing the name to something very similar so that it isn’t immediately apparent. For example, the user may change the name from AAA Office Services, Inc. to AAA Office Service, LLC.

It’s also important to note that you can be charged with embezzlement even if you didn’t keep the funds. Finally, some states do not have a separate embezzlement statute – embezzlement is simply charged as theft.

Phony Refund Schemes

Embezzlers can also use QuickBooks to facilitate a refund scheme. This involves overbilling vendors so that the user can then issue a refund for the amount they overpaid. However, the refund never gets to the vendor but goes to the embezzler instead.

Ways to Reduce the Risk of QuickBooks Embezzlement

While QuickBooks may make it easy for an employee to embezzle funds, most of these schemes can be prevented with some basic diligence.

  • Users should have separate login credentials. Sharing login information makes it easy for someone to hide what they are doing.
  • Restrict access. Not every employee needs full access to all QuickBooks functions. You can customize access for each employee. Ideally, you do not want the same person to be able to enter vendor information, enter bills, and make payments. You can reduce the risk of embezzlement considerably by assigning these tasks to users with restricted access.
  • Regularly review the audit trail and make sure users cannot enable the “condense data” utility. The audit trail will reflect all transactions and any modifications to those transactions, making it possible to detect fraud. However, be aware that “condense data” utility in QuickBooks will remove any condensed transactions from the audit trail. As a result, you should make sure that very few users have access to this feature.
  • Close the Books. Many embezzlers will try to hide what they are doing by adding transactions to past accounting periods. Make sure all financial transactions are closed at the end of each month.

Finally, the best guard against embezzlement is to make sure your business’s books are always up-to-date and in order and you have strong internal controls. Disorganization and poor oversight is fertile ground for embezzlement.

Work with an Experienced Lawyer if You’re Accused

Since poorly managed accounting can lead to embezzlement allegations, it is important to contact a skilled and knowledgeable attorney with a background in white collar defense if you’re ever questioned or charged. Embezzlement can lead to serious criminal penalties and devastating consequences if your livelihood depends on working with numbers.

Take these charges seriously from the start and consult Worgul, Sarna & Ness, Criminal Defense Attorneys, LLC as soon as possible. Call (412) 281-2146 or fill out our online contact form to set up a free, initial consultation.