Cash Larceny How to Identify and Prevent Cash Theft

bank deposit slip

We recommend compiling a profit or loss statement for each fundraising activity. Why would an organization continue to hold fundraisers if they are not profitable? Construction Business Owner published an article by Director Andy Choi, about the impact of new lease accounting standards on key financial ratios.

  • To conceal the theft, the employee may supplement a check into the deposit such that the total deposit is the same but the composition of checks and currency is not.
  • Informal audits can include checking the accuracy of recorded information, just as formal audits do.
  • Check receipt sequences to ensure the receipt order is sequential and all numbers are accounted for.
  • If unreliable financial statements and bad accounting have been problems for your business, the solution is outsourcing.
  • Strong internal controls are necessary to prevent mishandling of funds and safeguard assets.

It gives them an opportunity to reconcile the cash register to a figure that conceals their theft footprints, allowing them to steal without getting noticed. Internal controls are processes and records that ensure the integrity of financial and accounting information and prevent fraud. Lapping schemes typically happen in smaller companies where only one person may handle cash receipts and customer billing.

Documentation Required for Charitable Donations

Discourage the hiring of relatives and business transactions with Board members and employees. Ensure that agency assets such as vehicles, cell phones, equipment, and other agency resources are used only for official business. Examine expense reports, credit card charges, and telephone bills periodically to determine whether charges are appropriate and related to agency business. Require independent auditors to present and explain the annual financial statements to the Board of Directors and to provide management letters to the Board. Require employees to submit itemized, original receipts for all purchases. Account for all cash transactions accurately to ensure correct information is available regarding cash flows and balances.

What are the 4 internal control measures for cash?

There are four internal control measures for cash. They are employee background checks, use of written protocols, separation of duties, and securing assets and cash in safe locations.

Unexplained reductions in stock may indicate that the item is being passed to customers, without the sale being processed and banked. No matter what system is used, a dishonest employee may process a sale to an accomplice but recording the sale price for a cheaper item than actually taken by the accomplice. Generally the accomplice will select the expensive item wanted and a sale tag and take the expensive item and the cheaper tab to be processed. A real sale of goods with a real customer is required, as someone needs to hand over the money that is stolen. The employee will sell an item to a customer, hand the item to the customer and take the money from the customer, but will either not ring up a sale or ring up a void sale. Cash theft is especially problematic in businesses with loose inventory controls such as food or bar service.

Marcum New England Construction Summit

I am founder and President of a team sporting goods business based in San Diego. When the shutdowns hit in 2020, we were hit hard with what I call the 3 big strikes; we are in California, the most closed state, we sell to schools, and we sell team sporting goods. Our sales dropped 50% and our bank called our line of credit due to decreased sales. Employees may also assist you in keeping track of and preventing employee fraud at your business.

  • In addition, he consults with other CPA firms, assisting them with auditing and accounting issues.
  • If you run a business that does a large volume of cash transactions, you’re at a heightened risk of employee fraud.
  • For the last thirty years, he has primarily audited governments, nonprofits, and small businesses.
  • Require two signatures on each check over a material amount so that one person cannot withdraw funds from the bank account.
  • The 2022 Marcum Year-End Tax Guide provides an overview of many of the issues affecting tax strategy and planning for individuals and businesses in 2022 and 2023.
  • An individual takes possession of cash or another negotiable financial instrument after the cash has been entered into the company’s records.

To combat this type of crime, it is important to educate your employees on the warning signs of fraud. In addition to anti-virus and password protection, companies should also invest in data destruction software. Data destruction software ensures that employees cannot take any company information with them when they leave the company.


Make unannounced Cash Receipts Theft Prevention audits and have a yearly audit performed by an outside firm. It is good for any and every business to be audited by an outside firm. Have an employee who has no other cash duties prepare the bank reconciliation each month, so that errors and shortages can be discovered quickly. Require all checks to be serially numbered and limit access to checks to employees authorized to write checks.

Take a similar approach with non-food bulk items, such as mulch, by strictly following a standardized measuring and inventory system. Advantage Healthcare Consulting, a division of Advantage Administration, is a Management Services Organization that helps practices do just that. They have created a network of ophthalmology providers that offer a wide range of medical products and services – including ophthalmology-specific accounting firms. This network is easily accessible by members of the MSO with the added benefit of significant savings. Because there are so many MSO members, the group buying power is helping practices across the country grow their bottom line.

Organize regular audits

One copy should be provided to the payer while the other copy is kept on file. Total deposits can be verified independently by another person by accounting for each sequentially numbered receipt. When testing a bank rec, deposits in transit are more important than outstanding checks!

  • When money is being passed back and forth, the employee may pick some cash and slip it into his pockets when no one is watching.
  • Start with background checks to research the people working for you.
  • Their staff and services are attentive, professional, and highly personalized.
  • A County cashier recorded fictitious transactions in the accounting system to misappropriate at least $617,467 in Real Estate Excise Tax payments over about six years.
  • The employee may use another inventory item as the returned item, even damaging the item to provide a reason why it was returned.
  • The employee will usually process the credit off their own, or an accomplice’s, credit card.

However, you do not need to accept this as a cost of doing business. This needs to be done carefully to avoid signaling you don’t trust employees. By instituting a second party at each stage, providers can establish accountability at every level of the internal financial process with minimal extra labor.

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