Expense Reimbursement Fraud

Skimming May Sound Small, But Losses Can Be Significant

Skimming is not the biggest fraud threat for most businesses. The theft of cash receipts represents only 11 percent of asset appropriation schemes, according to the Association of Certified Fraud Examiners’ ‘2020 Report to the Nations.’ But with a median loss of $47,000, your business will likely feel the pain if it becomes a victim of skimming. Here is what you need to know to prevent it.

Usual Tactics

Skimming occurs when an employee steals an incoming payment before it is recorded. In the most basic skimming scheme, a worker 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 the company’s inventory ledger.

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

What To Look For

To detect skimming, look for infrequent bank deposits and consistent bank balance fluctuations as well as frequent shortages of cash on hand. If you suspect skimming, we can help you perform physical inventory counts to check if inventory levels match recorded sales. We also can review journal entries for false credits to inventory; irregular entries to cash accounts; and write-offs of lost, stolen, or obsolete inventory.

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.

Also consider implementing these other preventive measures:

  • Monitor spaces where employees handle cash with visible video cameras
  • Require daily bank deposits
  • Investigate no-sale and voided transactions
  • Reconcile cash deposits to all cash and checks received
  • Regularly reconcile inventory records to look for shrinkage
  • Provide an anonymous tip hotline for employees, customers, and vendors

Vulnerable Industries

Certain organizations are more vulnerable to skimming. Small companies (those with less than 100 employees) and those in the education, real estate, and transportation and warehousing fields experience higher rates of skimming and may want to take extra precautions. Whatever your industry, contact us at the first sign of fraud.

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