A Lesson in Why External Financial Oversight Still Matters
By Sarah Young
Over the past 11 years, we’ve seen a pattern repeat itself more times than I wish were true.
A long-time client grows. Business is good. Work increases. They decide they need more support internally and hire an admin, office manager, or in-house bookkeeper.
That part is completely normal. Healthy, even.
But sometimes what begins as a step toward growth quietly turns into a vulnerability.
The Situation
In several cases over the years, a client who had been successfully outsourcing their bookkeeping services decided to bring someone in-house to “help with the day-to-day.”
At first, the transition looked reasonable.
But slowly, subtle changes began to appear.
Lanes began to blur.
Accountability softened.
Communication shifted.
The new internal hire started “catching” mistakes from outside partners.
Emails became sharper.
The tone became defensive.
Owners began hearing that “things weren’t being handled well.”
Now, to be fair — sometimes adjustments really are needed.
A client’s needs may grow.
Project complexity may increase.
The assigned service level may need to change.
We are always open to making those adjustments.
But in over 90% of the situations where this pattern emerged, those early signs were not about operational issues.
They were the first signs of displacement.
And eventually, fraud.
How It Starts
Financial fraud inside a company rarely begins with a large theft.
It usually starts small.
Very small.
In multiple cases we’ve investigated, the first sign looked something like this:
- An “accidental” duplicate payroll payment
- A slightly larger paycheck than expected
- A PTO payout no one else received
- A small extra weekly payment
- A “accidental” use of the company card
- A missing/voided check
At first it can be explained away.
But over time, those small discrepancies grow.
$15,000
$40,000
Sometimes far more.
We’ve seen everything from smaller payroll abuses to cases that reached into the millions.
And in nearly every major case we uncovered, payroll was the biggest culprit.
Not vendor payments.
Not supplies.
Payroll.
The Hardest Part for Owners
When these situations are discovered, there is almost always a story.
A sick family member.
Financial hardship.
“I meant to pay it back.”
Most business owners are compassionate people. That’s often part of what made them successful in the first place.
Unfortunately, that kindness is often what fraudsters rely on.
In the majority of the cases we’ve seen, the employee was not reported to authorities.
Out of multiple fraud situations over the years, only one or two were formally reported.
Which means those individuals are still out there.
Applying for jobs.
Interviewing.
Presenting themselves as trustworthy employees.
The Lesson
Fraudsters will attempt fraud regardless.
But what we have learned over time is this:
External oversight dramatically reduces the opportunity.
It may not prevent every bad actor.
But it will deter many of them.
Especially:
• First-time offenders
• Employees “testing the waters”
• Individuals who believe no one is watching
Independent review changes that equation.
The Safeguards That Protect Businesses
Companies that successfully protect themselves usually have a few key controls in place:
• Separation of duties
• Independent reconciliation of accounts
• Payroll review outside the person processing payroll
• Bank account oversight by leadership or a third party
• External financial review
These are not signs of distrust.
They are signs of responsible leadership.
The Bigger Picture
Growth requires systems.
And systems require accountability.
Hiring internal support is often the right move for a growing business — but it should never eliminate independent oversight.
In fact, as companies grow, oversight becomes even more important.
Because high tides don’t just raise boats.
They require anchors too.
— Sarah Young
Premier Business Services, Inc.
