The people working in your accounting department have access to your money and financial information. While you will expect these workers to be honest, there are times when this is not the case. If one of these employees needs cash, he or she might come up with a plan to steal from your business. There are many ways accounting employees embezzle money out of a company, and understanding these methods may help prevent this at your workplace. Here are some of the common ways this occurs with accounting workers.
One common way people embezzle is through fake vendors. If an employee decides to steal money from you, accomplishing this task can be relatively simple if the employee creates fake vendors. To do this, the employee would need to set up a fake name for the vendor and come up with a fake address, which is often a post office box. This employee may also need to set up a bank account under the name of the fake company.
The employee would then begin submitting invoices from the fake company to your company. When the accounts payable department receives the invoices, they will make checks out and mail them. Your employee could then retrieve the checks from the post office box and cash them.
This type of theft is hard to detect in large businesses, because large businesses often make out hundreds of accounts payable checks each week or month.
A second way employees could commit fraud in accounts payable is by making duplicate payments to vendors. This method works best when an employee has a trusted relationship with a vendor and has convinced the vendor to take place in this fraud.
With this method, an employee would write out two checks to the vendor for invoices. The vendor would then keep both checks and split the proceeds of the extra check with the employee that sent the check.
This method is relatively easy to catch if you are looking for theft, because it leaves an easy-to-spot paper trail. If you are looking for this type of fraud, you would be alerted if you found two checks made out for the exact same amount to the same vendor within a short amount of time.
You should realize that this method can be hard for an employee to cover up. The employee would have to find a way to keep the books balanced in order to use this method, and this can be hard to do when creating duplicate checks for invoices.
Stealing Cash Directly
A third method is stealing cash directly. While this method may seem unrealistic and impossible, it is very common. When employees have access to your company's cash and bank accounts, it really is not hard to just steal the money. An employee could write out a check to him or herself and cash it, or he or she could take money from your petty cash fund.
There are many ways to prevent all three types of fraud schemes listed here, and one of the best methods is with internal controls. Internal controls are systems and procedures designed intentionally to prevent fraud from occurring in a business.
One common element of internal controls is separation of duties. Employee theft is more likely to occur if one employee has too much power. In other words, if one employee can access all your financial information, this employee might be able to steal from you very easily.
If you suspect fraud in your company or if you would like to find ways to prevent it from occurring, you should look into hiring an accounting firm like Epps Forensic Consulting PLLC that specializes in financial forensics. They are experienced in discovering proof of fraud and catching the culprit.