Alarm company whose bookkeeper embezzled $600,000 must still pay its security equipment supplier.

New Canaan Alarm Company, whose bookkeeper embezzled over $600,000 from the company, must still pay over $100,000 to its fire and security alarm equipment supplier, Alarmmax Distributors, Inc., even though Alarmmax brought its claims more than four years after the last purchase.  The case hinges on interpretation of the Uniform Commercial Code and statute of limitations arguments.  It’s a bit dry, but you can read it here:  Alarmmax v. New Canaan Alarm.

It’s not the law that’s worth talking about here, though.  The big takeway for your business is the need for some accounting controls–which were apparently lacking for both sides in this case.

If you’re a distributor, you must have tighter reins on your extensions of credit and receivables.  When you let a company “run up a balance” as Alarmmax did here, you leave yourself exposed.

If you’re an alarm company (or any business, really), you must have internal controls so that no one person has access to the financial accounts with no oversight (e.g., whoever deposits the checks should not also be the person who reviews the bank statements, etc., etc.).