Skimming Cash Payments: Prevent It

By Charles Hall | Asset Misappropriation

Nov 02

Skimming cash payments is a common theft, especially if receipting controls are lax. Here’s how the theft occurs and how you can prevent it.

The Theft: Skimming Cash Payments

Your cash clerk is skimming cash as it comes across the counter. He does so by:

  1. Not issuing a cash receipt, or
  2. By using a second cash receipts book

Theft of cash

In the first instance, the clerk knows which customers expect a receipt and which ones don’t. By not issuing a receipt he (the clerk) can put the cash in his pocket and–at the end of the day–walk out the door. He is careful to write off any related receivable (making an adjustment in the accounting system to reduce the customer’s receivable balance). As a result, the customer receives no bill for nonpayment. The clerk knows that no one–such as a supervisor–monitors receivable adjustments. Also, the business has no security camera.

In the second instance, the clerk has two physical receipt books, one for checks and one for cash (though everyone in the business thinks he has just one). The checks are deposited by the clerk into the business’ checking account and the cash is stolen. The customer receives a receipt whether he pays by check or cash and is unaware of the two receipt books. Again, the collections clerk writes off–by making an entry in the receivable software–the customer receivable. The result? The customer has a $0 balance and the clerk skims the cash.

The Internal Control Weakness

In the first instance (no receipt is issued), no one is monitoring the adjustments to the receivable accounts. And no one is tracking the receipt books issued (or being used). Also, the business has not installed a security camera to record the theft of funds by the clerk.

In the second instance (use of two receipt books), again, no one is monitoring the adjustments to the customer receivable accounts. And, again, there is no camera to record the use of the second receipt book.

Prevention of Cash Skimming

Have someone, such as a supervisor in the collections department or the controller outside the department, monitor daily adjustments to customer receivable accounts. The clerk should know that his receivables work (including any adjustments to receivables accounts) is being monitored. If the business is small, the owner should request a daily or weekly printout of all adjustments to the receivable accounts.

Install a camera to record all actions of your cash collection clerks.

These simple steps will greatly reduce the threat of clerks skimming cash payments.


About the Author

Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty-five years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention, The Why and How of Auditing, Audit Risk Assessment Made Easy, and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles consults with other CPA firms, assisting them with auditing and accounting issues.