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QuickBooks Blunders, Part 2: The Case of Multiple Personalities

Jun 3rd 2015
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Multiple QuickBooks personalities
iStock/Alberto Bogo
The case of multiple QuickBooks personalities

In my continuing series, I'll share with you the most challenging case that I have encountered – the case of the multiple QuickBooks personalities.

Meet Jenny. She is the in-house bookkeeper for a midsized business. The company has two distinct divisions: professional services and wholesale distribution, with different warehouse locations. Due to the specific needs of each division and Jenny's lack of specialized QuickBooks knowledge (or Jenny's ulterior motives – more on that later), Jenny created three additional QuickBooks company files to track various inventory locations, as well as the company divisions.

Jenny made such a tangled web that no one in the company could really tell what was going on. The company's outside CPA compiled financial statements on a monthly basis. They performed a basic write-up engagement and recorded the company's transactions using various sources of information, including a check register, invoices issued, inventory reports, payments received, etc.

Somewhere along the way, the opportunity arose and Jenny started “borrowing” money from the company. I'm sure that Jenny had every intention of paying the money back. As time went by, however, Jenny figured out that no one was missing the money she was taking and her “borrowing” continued. After a while, Jenny had turned her enterprise into a family affair – even her husband and relatives were “borrowing” money from the company.

A few years later, the unsuspecting CEO of the company received a call from the bank about suspicious activity. It didn't take long for the company's management to uncover Jenny's massive embezzlement scheme. Needless to say, Jenny was terminated and prosecuted. Jenny is now looking forward to spending a significant period of time in prison. She definitely won't be able to wear her expensive Jimmy Choo shoes behind prison bars.

After an internal investigation was conducted by the company's management, they found that Jenny had been a very busy lady covering up the extent of her fraud, including altering bank statements, forging the CEO's signature, providing false reports to the CPA, and printing checks made out to her and then changing the payee name in QuickBooks to the name of one of their largest vendors.

Reeling from the shock of Jenny's fraud, the company's management contacted me to find out whether I could help them create one QuickBooks company file out of the four separate company files. Could we indeed take this QuickBooks multiple personalities mess and create one company file? Could we customize QuickBooks to work with distinct divisions and inventory locations? Could we train the employees to use one QuickBooks file correctly? Would the client be receptive to setting up a system of internal controls? These were the questions that permeated my mind as I learned about their needs.

How did we bring sanity to this company? First, they upgraded to QuickBooks Enterprise. We used Q2Q utilities to carefully and painstakingly create a new QuickBooks file and import all the transactions that had been recorded so far throughout the year. We used the compiled financial statements as of the beginning of the calendar year to record opening balances in QuickBooks. It was a challenge to get detailed inventory reports, as well as accounts payable and accounts receivable agings, but we were able to import those transaction details also.

We customized their QuickBooks setup and showed them how to customize invoices and sales orders for each division. We set up classes so they can track income and expenses by division. We also set up QuickBooks advanced inventory so they can track inventory by location.

After we delivered the new QuickBooks file to the client, we set out to retrain their staff. They were used to doing things in QuickBooks the way that Jenny, the bad bookkeeper, had taught them. We provided customized training to various groups of employees to show them how to use QuickBooks correctly.

Finally, we worked with the client to set up better controls in QuickBooks, including setting up users with specific permissions.

As I mentioned, the case of the multiple QuickBooks personalities has been one of the most challenging engagements that I have worked on. I am so glad that we were able to make a major difference for this client and to finally bring peace to a very difficult chapter of this company's history.

The moral of the story: Internal controls (or lack thereof) should never be based on trust. As CPAs and advisors, we should advise our clients to establish appropriate internal controls for their organization.

Do you have any stories to share? Leave a comment below.

About the author:
Veronica Wasek is an Advanced Certified QuickBooks ProAdvisor, a CPA, a public speaker, and a member of the national Intuit Trainer/Writer Network. Veronica is the founder of VM Wasek CPA LLC, a QuickBooks-centric firm specializing in customized QuickBooks set up, training, clean up, consulting, and bookkeeping. Veronica's blog, http://5MinuteBookkeeping.com, provides tips, videos, and tutorials for small businesses to get their bookkeeping done in as little as five minutes a day using QuickBooks Online.

Related article:

QuickBooks Blunders, Part 1: Tales of Reconciliation Nightmares

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