Common types of cash and check fraud


Stealing from the cash drawer is the least common type of cash fraud risk small businesses face

Stealing cash after it has been recorded, which is called cash larceny, is actually quite rare in small business since the amounts are small and the risk of discovery is great. Most cash-related frauds fall into one of these categories.

Fictitious invoices: An employee submits invoices for a fictional vendor they’ve created, then pays the invoices and deposits the checks in their own account. This is made easier if the same person who hires vendors also pays them.

Inflated invoices: An employee invoices for more than the actual amount, and then when payment comes in they deposit the actual amount owed and pocket the rest. 

Skimming: Cash or checks are stolen BEFORE they are recorded. An employee might steal checks from the mailroom and then steal inventory so they “fill” the order.

Personal expenses: An employee claims their personal expenses are business expenses, and submits invoices for them. For example, they pay their own telephone bill with the company’s funds. Made possible when the same person approves and pays expense reports. 

Expense inflation: A simpler and more common version of the personal expense scam. In this instance the employee files an expense report and includes inflated, fictional, or personal expenses. For example, someone on a business trip claims more cab rides than they actually took.

Ghost employee: An employee who manages both bank accounts and payroll, creates a fictitious employee and has the money deposited into their own accounts.

Register falsification: A shop floor employee rings up a cash sale for a low amount and pockets the extra cash. For example, they sell a dozen cupcakes for $30 cash but only ring up a half dozen for $15. They put $15 in the register and $15 in their pocket. Inventory audits can help avoid this, but not if your business has a great deal of spoilage. In that case you need to rely on there being two sets of eyes on the register.