For general liability insurance, bookkeepers pay a monthly cost of roughly $30, or $350 annually. This coverage covers third-party injuries, third-party property damage, and advertising injuries for bookkeeping businesses.
For more comprehensive coverage, Insureon’s licensed agents often recommend a business owner’s insurance. A BOP is a policy that combines general liability and property insurance at a discounted rate.
On Insureon’s general liability insurance cost analysis page, you can learn how to save money on your policy, which coverage limits to choose, and more.
Do you need insurance for bookkeeping?
Insurance for bookkeepers safeguards you in the event of an error. There’s a chance you’ll overlook something no matter how thoroughly you go over your clients’ books. It is highly suggested that you have professional indemnity insurance in place to protect your job. We offer a variety of alternative cover options that may be customised into your ideal protection plan, unlike many bookkeeper insurance programs that offer a “one-size-fits-all” policy.
How do I protect myself as a bookkeeper?
Countless headlines demonstrate what can happen when a company’s “trusted” bookkeeper is overworked. Embezzlement and theft can go undetected for decades, and the consequences can be disastrous, putting the company’s entire operation at danger. While it is hard to remove all internal and external fraud concerns, following best practices can considerably minimize risk within your firm.
Implementing a risk management program is the first step toward lowering your company’s fraud risk. Senior management must make it obvious that no sort of dishonesty will be allowed through their words and actions. Review your insurance coverage every year to make sure you’re protected against internal and external thefts, and make sure your accounting and/or bookkeeping firm is properly bonded. In addition, inquire about your accounting and/or bookkeeping firm’s employment methods to ensure that its employees are properly screened.
While successful firms cultivate a trusting environment, putting in place proper control systems can help you verify your employees’ behavior. Create a separation of roles by delegating business functions to more than one person or department to limit the risk of fraud and errors. Set up and approve new vendors, approve invoices to be paid, write checks/start electronic payments, approve new hires, approve and alter pay rates, process payroll, and reconcile bank and credit card accounts, for example.
All employees who work with a company’s books and records should be thoroughly screened. Check their employment, credit, residence, bankruptcy, and criminal and civil court records, as well as their criminal and civil court records. Because many bookkeepers who are caught in a fraud are not prosecuted, they move on to the next victim. A thorough background check will reveal if a potential employee is a high-risk or low-risk candidate.
It is much easier to spot unexpected spending or balance sheet concerns that are incurred as a result of bookkeeper fraud when you have financial transparency. As a result, it’s critical to reconcile your balance sheet and assess your financial results against your budget on a monthly basis. Make certain to:
- All cash receipts should be deposited into a business bank account. While it may appear to be more convenient to pay for petty cash with cash from the drawer, this method fosters an environment where money are easily misdirected.
- Examine all bank and credit card statements thoroughly. It is advised that business owners get unopened bank statements directly in the paper-based environment. Business owners can access bank records online on a regular basis and set up alerts to tell them of any large or unexpected transactions in the electronic world.
- Regularly get your books reviewed by a third-party accounting firm. A regular audit by an outside accounting firm can be a powerful deterrent to fraud.
- Use an accrual accounting system to keep track of your finances. Use the accrual basis of accounting to eliminate the variances that arise when using the cash basis of accounting (recording revenue when cash is received and expenses when checks are cut) (recording revenue when earned and expenses when incurred). This will assist you in identifying unexpected outcomes.
- Your balance sheet should be balanced once a month. While most business owners appreciate the necessity of reconciling their bank accounts on a monthly basis, reconciling all balance sheet accounts on a monthly basis is just as critical. Ascertain that the transactions on the balance sheet are appropriate, so that improper items within these balances do not obscure the income statement’s findings.
- Ensure that all books and records are stored safely. Whether you keep your records online or on paper, make sure to conclude each financial period and lock up documents so that previous transactions can’t be changed.
- Check stock should be eliminated or locked up. It is more difficult to destroy or hide vital documents when using electronic payment systems. If you’re going to use paper, make sure that all checks are accounted for by management.
Fraud is more common than most companies think. Not only can employing accounting best practices discourage an employee from committing fraud, but you will also gain a better understanding of your company’s finances.
Are bookkeepers liable?
Bookkeeper responsibility may be a source of concern for some business owners. Whether you keep your own books or delegate that responsibility to an internal or outsourced bookkeeper, it’s important to understand the obligations that come with the job. After all, safeguarding your most precious assets your staff is vital to the success of your company.
Insufficient Funds
One reason a check may bounce is that the payer lacks a dedicated accountant to maintain track of his or her affairs. Vendors expect to receive their payments on schedule even in this situation. An authorized representative (i.e., one with check-signing authority) is personally liable to the payee unless the representative can prove that the firm did not intend for him or her to assume that duty, according to the Uniform Commercial Code.
What to look out for: To safeguard the bookkeeper from personal liability, need a second signature from a supervisor or corporate authority on each check.
Unpaid Payroll Taxes/Withholdings
One of the IRS’s hot button concerns is worker classification, and the agency is looking for red flags in business tax filings. Who is responsible for missed payroll taxes if a corporation asserts that employees are independent contractors but the IRS later reclassifies those workers as employees? Consider the following scenario: When a corporation is cash-strapped, it pays its vendors first before sending payroll tax withholdings to the IRS. Who is in charge of that decision?
The IRS might make bookkeepers personally accountable for 100% of any trust fund taxes (i.e., employees’ Social Security, Medicare, and withheld income taxes) in any situation if they:
- are “responsible parties” with decision-making authority (in other words, they decide which checks to send out as a check-signer), or
- Even if a business officer told them not to, they refused to pay the taxes.
What to look out for: If at all feasible, avoid designating bookkeepers as approved check signers and instead require checks to be signed by a supervisor or a corporate officer. You may not be able to argue that you have no decision-making authority or that you were unaware that taxes were owed if you are a business owner who does your own bookkeeping. Instead, shield yourself from personal liability by becoming familiar with the role’s dangers.
Data Breaches
Companies that outsource their bookkeeping should be aware of the hazards to their data security. If a security breach affects bookkeepers who store confidential customer information on their networks, the information could be exposed, corrupted, or lost. Breach reporting requirements and other fines for violating state and federal privacy and security standards may be triggered by these attacks.
What to look for: Make sure your bookkeeper has solid data security procedures in place, including a written policy for handling confidential information.
CRI Can Help With Bookkeeping Liability Hazards
Running a prosperous business includes keeping an eye out for anything that could jeopardize your most valuable assets, such as your and your employees’ personal finances. Please contact CRI to learn more about how our client accounting services can assist you in keeping your company on track.
Do bookkeepers need to be bonded?
Either by their employer or to develop trust with their customers, bookkeepers are frequently obliged to be bonded. These are surety bonds, which are offered by an insurance firm as a guarantee of recompense in the event of a bookkeeper’s dishonesty or wrongdoing. To become bonded as a bookkeeper, you must show that you are fiscally responsible and honest. The type of this proof differs from one insurer to the next. At the very least, bookkeepers must show that they have never been convicted of financial fraud.
Do bookkeepers need public liability?
Are you an Australian business expert who offers accounting, tax, or BAS services to your clients? If that’s the case, you’ll need two types of liability insurance.
To begin, the Tax Practitioners Board (TPB) mandates that all BAS agents be covered by professional indemnity (PI) insurance. This is a crucial consumer protection mechanism that aids in the compensation of your clients if they experience any financial loss as a result of the services you supply.
The second requirement is public liability insurance for bookkeepers. This policy can protect your company against the financial consequences of on-site death, bodily injury, or property damage.
Are you unsure what these insurance policies cover or how to obtain them? Continue reading to get the answers you’re looking for.
Can bookkeepers steal money?
In many circumstances, the deception isn’t even particularly clever. The bookkeeper just takes money from your company and electronically transfers it to their own bank account. By inflating genuine overtime payments and stealing a percentage back from an employee, the bookkeeper who also processes your payroll can cheat you.
What is bookkeeping error?
A bookkeeper or accountant makes an error of commission when they record a debit or credit to the correct account but to the wrong subsidiary account or ledger. Money received from a customer, for example, is properly credited to the accounts receivable account, but to the wrong customer. The error would appear in the accounts receivable subsidiary ledger, which contains all customer invoices and transactions.
Can an accountant steal your money?
According to the Society for Certified Fraud Examiners, the average magnitude of small business fraud has climbed by roughly 17 percent in the last three years. That should pique your interest, because fraud and theft affect over 35% of all small firms.
To put it in a more concrete context, do you know two other business owners?
If that’s the case, at least one of you is probably being robbed right now.
Accounting fraud is one of the most common sorts of fraud, and “double checks” is one of the most basic methods used by internal accountants to steal money.
Suzy has been your bookkeeper for the past five years.
You have faith in her.
She’s never been late with a credit card payment.
She is highly organized, and she always has backup for each charge or bill you ask for.
She constantly hounds you about your receipts, which adds to her credibility.
You’ve learned to trust her to the point that she now not only pays all of the Company’s expenses, but also all of your personal bills.
You regard her as an important member of the Company and your family.
She has attended all of your children’s graduations, as well as your friends’ and family’s Christmas gatherings in recent years.
Can you sue your bookkeeper?
You may be held accountable for damages to victims of fraudulent bookkeeping practices in addition to face criminal prosecution. Investors are frequently the victims of bookkeeping fraud, and they may sue the company and you for misleading reporting. Investors may allege that if they had seen accurate financial accounts, they would not have invested in a company. If you willfully modify the facts of a financial transaction, you can be charged with conspiracy, racketeering, conflict of interest, and embezzlement in addition to concealment or misrepresentation of money.
What can a bookkeeper not do?
A Bookkeeper (who is not a registered agent) can process the system, but not in such a way that the client is’relying’ on the unregistered Bookkeeper to create, authorize, or evaluate it.