CeePrompt! Computer Connection

Embezzlement in high-tech world
09/23/96

by Cathi Schuler

Embezzlement is a vicious and ugly crime. It's victims may not be left lying bloodied and battered on a street corner, but the profound sense of hurt and violation is every bit as real. That precious of element of trust in a close relationship is robbed, leaving its victims feeling bewildered, dazed and sad.

Even a sense of anger seems absent, having been completely overwhelmed by disbelief. The best computerized bookkeeping systems available can't completely deter the resolute efforts of a dishonest employee hell-bent on stealing from a hard working employer.

During my tenure in the business world I have learned a rule of thumb that, sadly, has always held true: If you have four people in your employ, you can trust one. One person will make it a point to defraud or steal from you and two people will steal if given the opportunity. Hence, seventy-five percent of your workforce are potential thieves and only twenty-five percent are truly trustworthy.

While in the restaurant business, I concocted one security measure after another to control the theft of cash and food, but there always seemed to be one employee who managed to circumvent the system and abscond with the profits. "Oh...", I bemoaned, "if only I had one of those fancy computer systems that monitored inventory and food costs from the point of ordering to presenting the entree on the table."

These systems, called Point of Sale systems (POS) were, however, quite pricey and well beyond the reach of this small, local entrepreneur. I longed, however, for such a system until one day I overheard my food servers whispering about a popular new restaurant in town.

This brand-new eatery had a state-of-the-art computer system that was supposed to track every morsel of food and it probably worked reasonably well...until Sunday Brunch rolled along. This fixed price bill of fare didn't require that each meal be entered into the computer, since it was an all-you-can-eat buffet.

Quickly the devious ones figured out this weakness in the system and simply recycled the same guest checks between tables, pilfering any cash that was tendered to satisfy the bill. Some food servers pocketed as much as $200 - $300 each shift that didn't belong to them. Even the expensive computer network couldn't out-fox some fifty percent of the workforce tempted with a weekly embezzlement opportunity.

Theft in the workplace is certainly not limited to the restaurant industry and other high cash volume businesses. Small businesses of all kinds are prime targets for fraud and embezzlement since one employee often performs many bookkeeping tasks in an effort to keep labor costs down. After a period of time, employers find themselves at a comfort level of trust, and the requisite checks and balances seem to fall by the wayside.

Checks and balances must be in place in any size business lest they be subject to fraud and embezzlement. The easiest and most obvious check and balance is the monthly bank reconciliation. Who writes and signs the checks? Who reconciles the bank? If the answer is the same person, the potential for theft and fraud is present. The cardinal rule of bookkeeping is obvious --- He/she who issues or signs the checks should never reconcile the bank.

The bank account should be balanced diligently each month by a person who can verify that checks were paid against legitimate invoices. This should not be the same person who wrote or signed the checks. All deposits to the bank account should be balanced against the accounts receivable or sales registers. All canceled checks should be kept in order, including void or unused checks, to insure that all checks are accounted for.

Bookkeeping software and computers can automate and streamline these tasks, but entries can be falsified and altered if a human overseer doesn't audit the work. Programs such as Quickbooks do offer a system of multiple level passwords, owner and bookkeeper, for example, that deter the user from deleting entries, altering cleared items or changing figures from a closed month without an "owner" password.

My sage old grandmother used to remark that "people are no damn good" when she'd read bad news in the headlines. I'd like to believe that people are basically good and that a few bad apples, twenty-five percent or so, tend to spoil it for the rest of the bunch.

Regardless of your views on humanity don't let your guard down and keep a good system of checks and balances firmly in place to avoid the heartache and devastation that comes from being embezzled by someone you trust.


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cschuler@ceeprompt.com

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