For many small and mid-sized businesses, it can be tempting to assign all bookkeeping tasks to a single individual, trusting them with the financial health of the company. However, the lack of segregation of duties—where one person handles all financial processes—can open the door to serious risks, including fraud and financial mismanagement. Multiple studies have shown that inadequate checks and balances, particularly in businesses where a single bookkeeper controls the books, significantly increase the likelihood of fraudulent activity. Implementing a fractional accounting department offers a much safer and more scalable solution.
The Risks of Single-Bookkeeper Models
Relying on one person to handle everything from recording transactions to preparing financial statements creates opportunities for undetected fraud. The Association of Certified Fraud Examiners (ACFE) reports that businesses with fewer than 100 employees are particularly vulnerable, experiencing a median loss of $150,000 per incident. A lack of oversight makes it easier for dishonest employees to manipulate records, write fraudulent checks, or divert funds. In fact, according to the ACFE’s 2020 Global Fraud Study, about 42% of small business fraud cases involved a lack of internal controls, such as segregation of duties, making it the top contributing factor to fraud.
Case Studies: Fraud and Lack of Segregation of Duties
One notorious example is the case of Rita Crundwell, who embezzled over $53 million from the city of Dixon, Illinois, over two decades. Crundwell had complete control over the city’s finances, and the lack of segregation of duties allowed her to funnel money into her personal accounts without detection. This kind of fraud could have been prevented by having multiple people review and oversee financial transactions. Similar cases of fraud involving small businesses often reveal that when one bookkeeper is solely responsible for handling all financial processes, it becomes nearly impossible to detect fraudulent activity until it’s too late.
The Solution: Fractional Accounting Services
A fractional accounting department provides a safeguard against these risks by introducing professionalism, segregation of duties, and scalability. Unlike a single bookkeeper, a fractional accounting service assigns different roles to multiple professionals—ensuring that no one person has complete control over all financial activities. For example, one team member may handle accounts payable while another oversees accounts receivable, and a third party performs regular financial reviews. This separation greatly reduces the chances of fraud, as any discrepancies are far more likely to be caught in routine audits and reviews.
Additionally, fractional accounting services offer the expertise of a full accounting department without the cost of hiring in-house staff. Businesses can scale their services based on their needs, accessing high-level accounting, tax strategy, and financial forecasting support as they grow. This model is not only cost-effective but also ensures that all financial data is handled with the highest level of professional oversight.
Conclusion
The dangers of relying on a single bookkeeper, particularly in small and mid-sized businesses, are well-documented. Without proper segregation of duties, businesses leave themselves vulnerable to fraud and financial mismanagement. Implementing a fractional accounting department solves these issues by providing structured, professional oversight at an affordable price. By splitting financial responsibilities among different professionals and ensuring routine reviews, fractional accounting services offer businesses both peace of mind and the tools they need to grow safely and efficiently.
By protecting your business with the right systems and controls, you not only reduce the risk of fraud but also position your company for sustainable success. For more information on how ACB Logistics can help safeguard your finances with fractional accounting services, contact us today.