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.
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.
Should a bookkeeper 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.
What insurance does an accounting firm need?
Professional liability insurance, commonly known as errors and omissions (E&O) insurance, is often viewed as the most crucial coverage on a CPA or accountant’s insurance policy. This is because E&O insurance protects accounting firms from liability claims and the costs of defending them.
For example, a client claims that your firm’s accounting error resulted in a loss of thousands of dollars and files a lawsuit. Regardless of whether the claim is valid, professional liability coverage would assist you in defending your company.
Should your bookkeeper have access to your bank account?
Through Wells Fargo’s Account Access Manager, you can grant an accountant or bookkeeper View Only access to your bank account.
Navigate to the small business portion of the Wells Fargo website. Select it from there “Account Access Control.” You’ll see a list of all the employees you’ve added to your account. You can remove authorized signers and grant individuals online access “Access to one or more accounts with “View Only” privileges.
Wells Fargo advises that you check who has access to your account on a regular basis and make changes as needed to meet your current needs.
Can bookkeepers steal money?
We instantly raise an alarm whenever one of our contractor clients is on the verge of a problem, issue, or disaster. We are cautious about this, and our clients understand that when we say there is a possible problem, we mean it.
Contractors are strong, resilient people who have a great deal of courage and will to succeed. The good ones aren’t prone to reacting in a quick or rash manner when adversity arises. This is just one of the many attributes about these dedicated men and women that I love.
Searching for Bookkeeper Embezzlement Construction Company on Google yields over 100,000 results. This is, has always been, and will continue to be a huge source of frustration. Unfortunately, in some circumstances, it is the direct cause of commercial and personal bankruptcy for construction firm owners.
Embezzlers of all races, creeds, colors, genders, and ages are on the loose. Until an embezzler is identified and convicted, there is no clear profile and, sadly, no absolute way of knowing which contractor bookkeeper is an embezzler. If you don’t conduct thorough background checks, you might not realize you have a crook on your payroll until it’s too late.
Don’t expect a bookkeeper to always be punished and forced to pay you back just because you caught them embezzling funds. You must understand that, for the most part, employees are perceived as poor innocent victims of cruel and selfish corporate owners by the general public.
The media, television, and movies further accentuate and reinforce the fact that the majority of the villains are businesspeople and women. Simply put, “We live in a world of what is, not what should be,” says Randalism.
Consider the situation of a bookkeeper who worked for an automobile firm. She was accused of stealing tens of thousands of dollars, yet she only acknowledged to stealing $10,000.
She was sentenced to two years of probation with no jail time and ordered to pay $50 in restitution per month; however, she claimed that she was unable to pay because of medical concerns and financial hardship.
Understand the Employee Theft 10-10-80 Rule: Developed by auditors, accountants, fraud examiners, and anybody else involved in detecting employee theft through many years of experience and direct observations.
10% of all employees, including bookkeepers, will steal in one manner or another. They’ll extract bribes, kickbacks, and payoffs from your suppliers, vendors, and subcontractors, as well as your office supplies and petty cash. The sums can be in the hundreds of thousands of dollars, if not millions. They’ll do it regardless of the number of security systems in place. Why? They are untrustworthy and operate on the “taker’s” entitlement paradigm, which claims, “It is Better to Take Than to Make.” They can’t be stopped, but they can be captured! And you can only catch them if you have processes in place and can persuade the criminal justice system to act.
Because they have integrity and a “producer’s” paradigm that states: “It is Better to Make Than to Take,” 10% of all employees, including bookkeepers, will never steal. Finally, these are the individuals that will provide so much value to your organization that you will be unable to resist rewarding them with additional compensation, benefits, and recognition. If you do not, your competitors will recruit them!
80% of all employees, even bookkeepers, will steal if they believe they can get away with it and if the conditions let it. This is due to a lack of ethics as well as a notion of “Redistributing the Wealth, But Not the Work or the Responsibility.”
- They take records home to work on them, or they prefer to work at the office when no one else is there (Fraudulent activities are easier when nobody is around.)
- Shows indicators of a drinking, drug, or gambling problem, as well as financial difficulties in the family.
- Attempts to place blame for the problem in QuickBooks on the prior bookkeeper or an outside accounting company.
- Pays bills via cashier’s checks; but, when you look it up online, it only shows up as a withdrawal.
Owners of construction companies should take a few steps to help prevent bookkeeper embezzlement.
Outsource to a Professional Contractors’ Bookkeeping Service that has a structure in place for contractors’ bookkeeping:
1. Ensure that they do not take your money, make bank deposits, or pay any bills or taxes on your behalf.
2. Ensure that they are solely responsible for bookkeeping, which includes payroll processing, quarterly tax reports, invoicing, pay applications, and bank reconciliations. They must give you online access to QuickBooks For Contractors, as well as a separate web-based financial reporting tool that you may use at any time to generate work costing and financial reports.
3. Verify that they have on staff qualified construction accountants and bookkeepers.
4. Verify if they are based in the United States. Contractor bookkeeping services are not one of the many services that can be outsourced abroad to foreign countries. It may be inexpensive in the short term, but in many circumstances, construction firm owners have spent a significant amount of money in most cases, many times the cost of having us handle their contractors’ bookkeeping services.
5. Confirm that they have a professional office, not a home office where access to your contracting company’s documents is limited or non-existent.
You’d be astonished at how many wives and girlfriends of contractors take on their husbands’ or boyfriends’ bookkeeping. Your competitors’ competitors can quickly obtain information about your bids, estimates, profit, and loss.
Can you sue a 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 is the difference between being insured and bonded?
It’s not uncommon to hear a contractor claim to be bonded and insured, but exactly what this entails can be a bit of a mystery. You are bonded if you have purchased a surety bond that provides clients with limited guarantees. When you say you’re insured, it means you have a policy that protects you from accidents and liabilities, generally with higher limits than bonds.
One important distinction to be aware of as a business owner is that when a bond pays a client, you must repay the bond firm. Covered claim proceeds are not recoverable by the insurance carrier as long as you pay your premiums.
Can bookkeepers be held 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.
What is CPA liability?
- The legal liability that an individual assumes when performing professional accounting work is referred to as accountant’s liability.
- Accountants are responsible for any errors made during the auditing and preparation of financial documentation for a customer.
- Because accountants are held liable for any inaccuracies and may face legal action or financial damages as a result, they frequently purchase professional liability insurance.
- Errors and omissions insurance is a sort of professional liability insurance that is commonly referred to as errors and omissions insurance.
- In most cases, an accountant will not be held accountable for any misstatements if they behaved in good faith, according to generally accepted accounting standards (GAAP).
Can a CPA be held liable?
CPAs’ opinions have an impact on their clients, and their decisions might have an impact on investors, stockholders, business debtors, and even partners. Thousands of audits are performed each year by large public accounting companies. They will eventually discover unaltered reports on financial statements that may appear to be deceptive. Investors and corporate creditors may suffer significant losses if CPAs neglect to revise the audit report on financial statements that are grossly misstated.
CPAs may be liable for damages under common law, statute law, or both, depending on the jurisdiction. Negligence, breach of contract, and fraud are all examples of common law liability. Statutory law liability is a duty arising from the application of a statute or law to society. The amount of money recovered from these liabilities varies depending on the source or “thesis.” These are some of the theories:
- CPAs and their clients sign a contract in which they agree to execute specified services. When there is a violation of contract, liability arises. If the CPA fails to perform as stated in the engagement letter and the client suffers damages, the CPA is liable.
- Negligence in the workplace can be defined as “failure to exercise due professional care.”
- Clients and third parties can sue CPAs for negligence, which is a legal action that can be initiated for an unlawful conduct, injury, or damage. Ordinary negligence and extreme negligence are two types of negligence. Ordinary negligence is defined as a failure to perform a duty in line with applicable standards, whereas gross negligence is defined as a lack of care for the possibility of injury.
- Fraud is defined as the intentional misrepresentation of a substantial fact by a person who is aware of his or her acts with the aim of deceiving the other party, with the other party being hurt as a result of the misrepresentation.
- Statutory liability: Both federal and state securities laws impose statutory liability on CPAs. The firm’s defense costs, fines, and penalties are covered under statutory liability. An auditor can be held civilly or criminally responsible under statutory law.
CPAs and accounting companies may carry professional liability insurance to protect themselves from legal claims and litigation due to the potential of liability, while some firms choose to self-insure. Concerns about hefty damage awards and insurance costs have prompted suggestions to limit public accounting companies’ responsibility.