EMBEZZLEMENT IS INCREASING DURING THESE TOUGH ECONOMIC TIMES

Minimize the Risk

An article I recently read in the Wall Street Journal Small Businesses Face More Fraud in Downturn pointed out how, during this recessionary time with people having serious financial troubles, small businesses are experiencing more embezzlement than they have in the past. This brought to mind some tips we have given to our clients over the years to help prevent embezzlement. We've seen many of our new clients have this problem but when we teach them the management techniques I'll outline in my next few blogs, this problem disappears.

As I've gone over in my recent blogs, one does not have to be the adverse effect of the economy if one is trained in basic management skill. The area of embezzlement is a good example of that. Someone who does not know the basic techniques of preventing this type of crime could just "chalk it up" to the economy, the recession, etc. Although it may be true that tough economic times may cause more people to attempt embezzlement, it is also true that if one has some basic management systems in place, you don't have to end up being a victim of such an attempted crime.

The following procedures are recommended by an accountant and should be part of your normal routine as safeguards against embezzlement. Today I'll cover the handling of cash. In my next blog, I'll discuss several other areas to set up safeguards.

Cash Handling:

1. Have firm office policy that every patient/client gets a receipt whether they pay or not.
2. Cash handling and cash record-keeping duties need to be segregated. Have one person collect patient/client portions over the counter and another person post balances. Have a third person do bank deposits. As owner, play an active role in monitoring sales and cash if you have too few employees to fully separate the duties for handling cash and collections.
3. Each month, compare the amount of your collections that was cash to previous months. There will be some fluctuation, of course, but if it goes low one period, it is suspicious.
4. Start a patient/client sign-in sheet where patients/clients simply sign-in. Compare this on a daily basis to an over-the-counter-collections report (and day-sheet or equivalent), looking for inconsistencies such as patients/clients who are on the sign-in sheet but not listed on the day-sheet report. Spot check by phone call to patients/clients who are reported to not have paid a portion due that day. This can be done as a "quality control" call to the patient/clients. Of the questions asked one might be something like, "It's our policy that all patients/clients who pay any cash on the day of service receive a receipt. Did you receive a receipt today for any cash paid?" Implement this policy in writing and DO IT. This will make it far more dangerous to attempt embezzlement.
5. Have a written policy to conduct unannounced checks of petty cash and other cash accounts on a regular (bi-weekly or monthly) basis. Conduct these checks without fail.

If you implement the above steps, you will reduce your chances of embezzlement to nearly zero in the area of cash payments. If you have any ideas you would like to share regarding this, we'd love to hear from you. Our discussion forum can be found at: Silkin Facebook Page.


Larry Silver
President, Silkin

Silkin Management Group Home Page
Visit our Facebook Page
Silkin Management Group Press Room
Solutions Magazine