Embezzlement
Embezzlement involves the misappropriation of a company’s funds by an entrusted person within the organization. Chances are, most of us are probably familiar with an embezzlement case that impacted a family member or an acquaintance. Business owners need to be aware that it happens more often than one realizes, with most cases never being detected. According to the ACFE, the median loss caused by occupational fraud was $140,000 with more than one-fifth of the losses totaling at least $1 million, in 2012. Small businesses suffered the largest median losses, and nearly half (49%) of the victim organizations never recovered the fraud-related losses. When you retain our expertise, we skillfully...
The best way you, as the business owner, can avoid embezzlement within your company is routinely monitor checking accounts, verify customer payments, and implement stricter procedures to prevent phony refunds.
- Analyze financial statements and other accounting documents for unexplained changes in profit. Look for unexplained expenses recorded on the books. Check expense reports turned in by employees to verify that all reimbursements of expenses are approved by authorized personnel.
- Look at recent and past bank records and credit card statements. A sign of embezzlement is if your accounting records fail to balance with the information listed on your bank and credit card statements.
- Pull accounting documents and look for any unexplained changes. Look for changes in vendor information and additional unapproved vendors. Check the addresses of vendors and employees to see if any match.
- Verify that all of your accounting records are present. Organize all of your documents if they are disorganized. Important accounting information and vendor contracts that are missing may indicate that fraudulent activity is occurring within your organization.
- Check inventory levels for unexplained declines. A company's inventory turns over as it is sold or used to manufacture a product. Inventory levels that do not reflect the amount of a company’s revenue may indicate embezzlement is present in the company.
- Search customer accounts for a large number of credits. If a particular customer is continually showing a large number of credits, it may indicate that someone in the accounting department is crediting the customer’s account but pocketing the excess money when the customer sends in his payment.
- Analyze accounts receivable records for too many past due accounts. If a large number of accounts receivable accounts are past due, it may indicate that an employee in accounting is not posting the received payments to customers’ accounts.
The best way you, as the business owner, can avoid embezzlement within your company is routinely monitor checking accounts, verify customer payments, and implement stricter procedures to prevent phony refunds.