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Missing Money? A Fraud Investigation

As a business owner, have you ever had a hunch that money was somehow flying out of the business unaccounted for? If you are currently or have experienced this feeling that something just isn't right with the cash flow of your business, you may want to have a fraud investigation completed to see what is really going on.


On average, a U.S. company will lose 5% of revenue per year, due to fraud. Depending upon how much revenue your business generates, this can be a significant piece of your family's pie!


Point being, if there may be suspected fraud going on in your business, find a Professional Accountant that can help investigate and stop these wasted dollars from leaking out of your hard work.

Unfortunately for thieves, I have been in charge of investigating fraudulent activities for several different companies over the years, and have identified many millions of dollars that were stolen from them. I have seen the consequences of businesses losing too much money for too long and eventually going under because a malefactor was in the building.


Here's the thing about crooks...they always leave a trail. So the key to an investigation is in the cash and finding a fraud investigation accountant that can make their way through the paper trails of false entries to cover up the fraud.


Fraud investigations are simply an unraveling of the accounting records, by a trained accountant, that eventually leads to the culprit. Why so simple? Because cash was and is the truth in any given period of time for a business. There should and will be an explanation for every dollar coming in and going out of the company, if you look hard enough.


The other part of fraud control, besides a fraud investigation, is implementing month end accounting processes that will help identify potential fraud by using parameters on the data.


For example, one of my clients is a retail business that has four stores depositing cash weekly. Every month, I use the inventory/sales subsystem to reconcile cash, revenue, sales tax, discounts, etc. The other side of the accounting adjustment is an "Undeposited Funds" account where I monitor the balance every month as it should hover within a few thousand dollars of $0. One year ago, this process identified a huge swing in undeposited cash and a manager was found to have stolen over $30,000!


Whenever a lot of cash has the potential to change hands, this is where a lot of the "easy pickin's" happen because an employee can use a myriad of fraud methods to manipulate the cash (i.e. ring up a sale, take the cash, cancel the sale, pocket the cash). Month end and weekly accounting processes mitigate the ability for employees to outright take cash.


Obviously this is a very simple example of fraud. But as discussed above, there are layers to accounting and "smart" criminals will use these layers to hide their wrongdoing. This can be as simple as creating false documents, such as an invoice from another vendor, that the company pays unknowingly and the cash ends up in the hands of the invoice preparer.


Then there are situations where there are more than one person committing the fraud. These types of theft are harder to identify and nail down, but can be done if the investigation is committed to going through the accounting ledgers with a fine tooth comb.


Your bottom line is this, your business created this inflow of cash and, by no means, does some black hat deserve to have a penny of it that was not earned!


If you need any assistance in a fraud investigation, or just have a conversation about what may be happening, please reach out.


Blue Collar CFO

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