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.
Your cash clerk is skimming cash as it comes across the counter. He does so by:
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.
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.
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.
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Charles Hall is a practicing CPA and Certified Fraud Examiner. For the last thirty years, he has primarily audited governments, nonprofits, and small businesses. He is the author of The Little Book of Local Government Fraud Prevention and Preparation of Financial Statements & Compilation Engagements. He frequently speaks at continuing education events. Charles is the quality control partner for McNair, McLemore, Middlebrooks & Co. where he provides daily audit and accounting assistance to over 65 CPAs. In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.
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