Absentee Owner Needs to Pay Attention to the Numbers

PROBLEM:

I was hired as the CPA for a convenience store that was in complete chaos. The books and records, such as they were, didn’t make any sense at all. But the one thing that was certain was that the store was busy and they were always broke.

The owners fired the bookkeeper and hired a new one, who I worked closely with. But it was going to take awhile to try to reconstruct the records. Luckily, the store manager was experienced and really helpful. The owners (and I) figured the issue was probably that merchandise was walking out the door during the night shift. So, they installed cameras in new locations.

One day, one of the owners got an urgent phone call from the store manager. They needed to speak right away. The owner drove out, figuring that the culprit had been caught. Turns out the culprit was turning himself in.

It was the store manager, the most trusted and experienced person on staff. He had been ‘kiting’ the deposits – taking money out of the cash deposits from the day and delaying the deposits further and further out.

He thought that the bookkeeper and I were on to him from the questions we’d been asking. Truth is, we’d have caught him but the books were such a mess it would have been months before we did.

LESSON LEARNED:

Pay attention to your business, even if you’re an absentee owner. Don’t be afraid to ask questions. The employees will know you’re paying attention. And above all else, insist on timely financial statements that you understand how to read.

Thanks to:

Diane Kennedy, CPA
www.USTaxAid.com

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