Skimming is the next step up, a more complex way to steal often involving cohorts. It's not always employee against employer. In the good old days the Vegas casinos were legendary for skimming revenue off the top until the government taxing authorities stepped in with controls and a perpetual physical presence.
The Fraud
Stealing unrecorded sales receipts is dubbed skimming and is usually committed by cashiers, accounting personnel and, to a lesser degree, by customer service people and management.
A skimming problem arises when a cashier, for example, rings up a "no sale" without management approval. This allows access to the cash drawer with no corresponding entry on the tape. If the customer is in collusion with the cashier, they can split the stolen cash and no one's the wiser. "No sale" keys should be disabled or keyed only by a manager.
Skimming can also involve selling a product to a customer and not recording it at all. The perpetrator keeps the cash, the customer (accomplice or not) keeps the goods, and the inventory, of course, shrinks.
Accounts receivable frauds represent some of the most expensive skimming schemes. (But skimming sales is a lot easier to pull off than skimming receivables.)
Phony receivables can be created representing phony sales (which may eventually be written off) . . . effectively masking inventory thefts. Intercepting statements perfects this scheme for awhile.
Receivables can be re-dated to appear current, thereby masking unrecorded payments . . . deposited perhaps to the crooked employee's bank account by use of an altered payee scheme.
To cover up any discrepancies, the fraudster resorts to lapping. Lapping is a complicated ongoing fraud usually perpetrated by an employee who has custody of cash and check payments plus responsibility for accounts receivable recordkeeping. The fraudster receives a payment to a legitimate customer's account receivable and pockets it for himself. To cover this up, the stolen amount is replaced at a later date by receipts from another customer. This is repeated over and over and over again.
Inventory padding is often used to mask skimming schemes.
While most skimming is done via unrecorded sales, it can also be done via under-recordedsales. The skimmer sells 10 widgets at $100 each, but records 8 at $100 each and pockets the $200. Or he could record 10 sold, but at $80 each, and achieve the same result.
The Flaw
The failure to separate duties is the root of many large skimming frauds. Even small examples of skimming stem from a lack of consistent supervision and sometimes poor inventory controls. Misplaced trust is also a common problem.
The Fix
Segregation and rotation of duties cannot be over-emphasized as the single most effective method of controlling fraud in any business.
Cash control systems are essential in preventing this all-too-tempting target of employee fraud. The same person should not write checks, sign them, reconcile the bank statements, apply payments to receivables, and so forth. As we've said before, a division of these tasks is critical.
One simple way for a small business owner to ensure his cash is controlled is to open all incoming mail personally. Most of the mail you'll receive will be routine in nature, and this task could easily be assigned to an employee. But that one piece in a thousand is the one you can't afford to miss seeing first. You will be amazed at the things you can learn from personally attending to this seemingly low-level task.
If your bookkeeper were to embezzle funds and use the cash float to cover up the ensuing overdrafts -- and you always hand the unopened and unread bank statement to your bookkeeper because, after all, bookkeepers reconcile bank statements don't they -- there's no way you could learn of this problem until it's too late. Returned check notices come in the mail, but if you don't open the mail you'll never know.
Prevention of skimming can be as simple for some businesses as numbering receipts sequentially and tracking down any missing numbers. This tedious but effective auditing chore is often called "voucher accounting." Computers excel at these chores, but you must take the time to review their output and act upon any exceptions noted. Every numbered document must be accounted for . . . including voids. Strong internal controls like voucher accounting and separation/rotation of duties are essential methods of prevention.