Skimming: Stealing a Little Off the Top

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02 Jul Skimming: Stealing a Little Off the Top

Skimming is the theft of cash receipts. It occurs when an employee steals an incoming payment before it is recorded on the books. Here we will look at how this fraud scheme works so you can prevent it from happening to your company.

Behind the scheme

In the most basic skimming scheme, an employee sells goods or services to a customer, collects payment, and pockets the money without recording the sale. If the customer receives goods but no sale is recorded, skimming will cause a discrepancy between physical inventory counts and what is reported in the company’s inventory ledger.

Perpetrators also can skim receivables. This generally is harder to pull off, because overdue accounts appear on the accounts receivable aging schedule. Employees may try to cover their thefts by ‘lapping,’ or borrowing money from one account to make up for a shortage in another.

Detect & prevent

Although skimming can be difficult to detect, you should be on the alert for infrequent bank deposits and consistent bank balance fluctuations as well as frequent shortages of cash on hand. A forensic accountant can help you perform physical inventory counts to check if inventory levels match up with recorded sales. This expert also may review journal entries for:

  • False credits to inventory
  • Write-offs of lost, stolen, or obsolete inventory
  • Write-offs of receivables
  • Irregular entries to cash accounts

Your business can help prevent skimming by segregating employee duties. No one person should be responsible for collecting, recording, reconciling, and depositing cash receipts. Instead, split up those duties among multiple employees.

You also might consider monitoring spaces where employees handle cash with visible video cameras. Be sure to regularly reconcile inventory records to look for shrinkage. Other preventive measures include requiring daily bank deposits, investigating no-sale and voided transactions, reconciling cash deposits to all cash and checks received, and providing an anonymous tip hotline for employees, customers, and vendors.

No immunity

No business is ever completely immune to occupational fraud. We can help you reduce the likelihood and severity of skimming and other fraud schemes.

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