4 Types of Embezzlement That Could be Affecting Your Business

Embezzlement may be something you have heard of for years and not really understood. Embezzlement, according to our friend Google is, “theft or misappropriation of funds placed in one’s trust or belonging to one’s employer.” So, essentially it is stealing. There are many ways in which this can occur, from a cashier taking cash from the register to a high-level executive doctoring the books to give inaccurate information.

It is important to remember that while many people associate embezzlements with large, white-collar businesses, embezzlement is not unique to any one industry. The dental field is an example of an area which has seen a large increase in embezzlement. In fact, an estimated 40%. For deeper information on how to identify, stop, and prevent such embezzlement check out options for a fraud examiner like Brytan and Associates.

Cash Theft

As mentioned before, cash theft is a very basic and simple form of embezzlement. Many businesses have been affected by an employee taking cash from the register. This may start simply because an employee needs a little cash and forgot to go to the bank. Regardless of motive this is wrong and can get out of hand quite quickly.

Make sure whoever is counting the cash drawers has a sharp eye. If you see a discrepancy it needs to be looked into but does not necessarily mean an employee is stealing.

Payroll

Payroll fraud has a number of levels. It can be as simple as an employee clocking in for hours they didn’t work, or entering inaccurate overtime hours. Employee time should always be monitored carefully. Even if you trust your employees, it is a good practice as it will help cut costs.

Payroll fraud is also a common way for the payroll manager to give themselves an extra paycheck. This usually involves whoever is in charge of distributing payroll creating a fictitious employee, who gets a real paycheck for imaginary work. His can go on for a long time if no one else is responsible to check the numbers.

Billing

Billing fraud can occur both internally and externally. A case of internal billing fraud would look like an office manager doctoring deposit slips do be the wrong total, or stealing checks or credit card information. An employee in this position could easily steal such confidential information, both from customers and the business owner.

External billing fraud would be if a company you hired for a service tried to bill you more than once for the same work or tried to add hidden costs that were not agreed upon. All financial interactions need to be completed and watched over with extreme care. Detailed records should be kept so confusion and false claims can be avoided.

Lapping

Lapping is similar to some of the other embezzlement types mentioned. Lapping is where an employee takes money from one transaction and then uses money from a different transaction to replace the money while stealing money from each transaction. It would like your business receiving a cash payment for $200, and your office manager takes it all. The next payment happens to be $350. The office manager replaces the original stolen $200 and pockets the remaining $150. This pattern can continue for a very long time, and many businesses have lost large amounts of money to embezzlement schemes like this.

Embezzlement can happen in any business or organization. Proper steps to prevent embezzlement should be taken. Such practices include:

• Checks and balances. No one should be able to handle company resources without some sort of audit or another form of accountability.
• Employees should have limited access to payroll and financial systems so that the information, such as pay rate, cannot be falsified.
• Using human resource consulting or management companies to do payroll, HR, and other business functions.

Make sure that whatever embezzlement prevention measures you implement into your business are done quickly. Monitor their effectiveness regularly. Business ownership requires a strong will and savvy mind, and luckily those skills will go a long way in preventing embezzlement.