why dont you just put in proper controls? and have a CPA do a review or audit.
Hmm. Seems like you need to implement periodic inventory checks and make sure any changes in inventory are explained by cash. Sounds like it would be really time consuming though. I bet most pharmacies lose some inventory to employee theft. Drug abuse, for instance, is high among medical professionals…
Damn, is there any money left? They are milking your clinic real bad.
Hire me to come an interrogate. I’m rather intimidating.
Many, many years ago, I went to the ER because I was vomiting to the point of dry heaving and had the worst headache of my life (felt like someone was drilling straight into my head). I was in a lot pain from severe stomach cramps and of course, a crazy headache. The ER doctor thought it would be best if I got some sort of pain killer. He described it as synthetic morphine. I remember clearly the doctor telling the nurse to hold on to half of it as they were shooting it into my IV. I was clearly having the symptoms of a migraine which I didn’t know at the time. I swear he prescribed it so he could take half.
1.) Get a list of all your employee’s addresses.
2.) Get a list of all your vendor’s addresses.
3.) See how many of your vendor addresses are the same as employee addresses. Then see how much $ in payments has been made to that vendor over the past few years.
You’d be surprised how many employees will use their home address as their “vendor” address. They probably wont put in the time or effort to get a PO Box or find a different address.
Be especially careful when you see round amounts, like $3,500.00. More often than not, that’s fishy.
Have you checked your Cost of Goods Sold? I don’t know the industry average, but there should be some rule-of-thumb that says how much your COGS should be, as a % of revenue. For example, in the restaurant industry, it’s about 25%. If you sell $10,000 worth of sandwiches, then your food costs should be $2,500. Find out what the industry average is. If you can’t, then get your last few years of financial statements/tax returns, and put it into a spreadsheet. If your COGS is spiraling out of control, then you have an inventory control problem.
The same thing is true with Revenue. If your COGS (as % of revenue) are increasing, then you might have a Revenue control problem (i.e. “under the counter” sales for cash).
Do a similar analysis on your Salary Expense. If the store is open 60 hours per week for 52 weeks per year, and you staff 3 people at all times, and you pay them $10/hr, then 52 x 60 x 3 x10 = $93,600. (That’s a little oversimplified, but you should be able to figure out what your salary expenses ought to be.) If your salary expense is $120,000 instead, then you have a problem. You’re probably paying Casper the Unfriendly Ghost to come in and do nothing.
Check your employee records. If you live in the US, then you should have a W-3 for the company for the past seven years. If you don’t have it, get it from your CPA. (For the uninitiated, a W-3 is simply a lis of all the employee’s W-2’s.) Check the W-2’s to see if you have any duplicate Social Security Numbers or duplicate addresses. (Most accounting software will let you run reports and dump the data into Excel. From there, it’s easy to sort on SSN and see if there are some that are eerily similar.)
While we’re on the subject, you should have a W-4 for every W-2. Start matching them up. Once you’ve dumped all your W-2 information onto a spreadsheet, start pulling your W-4’s, and making sure they’re legit. Every W-4 should be accompanied by a photocopy of a Driver’s License and Social Security card or passport or some similar ID. If you’re issuing W-2’s without W-4’s, then you’re paying Casper.
Dude. he just said the guy who handles the money, handles the books. If cash came in, he can make the transaction “disappear”, and pocket cash. You’re going to match 0 with 0?
And surely I don’t need to tell you that not every Tom, Dick, and Harry should have access to set up a new vendor, do I? You only need one person (probably you) who has access to New Vendor Setup.
BTW - each vendor (unless it is a Corporation) should have a W-9, and be issued a 1099. You can run a report to get the Tax ID numbers for those W-9’s and match them against your employee SSN’s. You might be surprised what all you’ll find.
@ZB - have you ever “matched up receivables with collections and payables with disbursements”? That’s kinda like me telling you, “It’s easy to win the lottery. Just pick the right numbers, and you’ll win every time.” It’s a little easier said than done.
But Itera has a point–why is your accountant handling cash? Unless he/she is working the register, then he shouldn’t see any cash whatsoever. (If that’s the case, then why is your accountant running the register?) The only way he should get cash is if it comes through the mail–and that’s assuming that he’s opening the mail, pocketing cash, and writing off bad debt.
So maybe you should look at your bad debt write-offs. If they’re skyrocketing, then either you need to get better at debt collecting, or get better at monitoring your debt collection process, because somebody is making money off of you. If you see a lot of write-offs, maybe you can call those customers and ask them to pay up. They’ll let you know if they paid it. (They may be writing checks and leaving the “Pay to the order of:” field blank. Then all Johnny has to do is write his name in there, write off the bad debt, and nobody’s ever the wiser.)
Consider getting a PO box away from the office–especially for collections. This way, you can control who has access to your revenue stream.
That’s all I can think of for now. I have to get back to SEC pricing of oil and natural gas reserves for a 144A offering.
this. Forget the thieves, you need to find a hacksaw ASAP.
You should hire Arthur Anderson to do an audit.
I will have to convert all the accounting to IFRS for 2014. We will need to hire an audit/accounting firm for that. It can be the perfect excuse to do a thorough review with someone who has experience in that area.
I guess since they will be doing the conversion anyway, it may not be as expensive.
A good thing is that the employees will not feel they are being audited, so if they are stealing they may be off guard, and if they are not stealing they won’t feel that I am treating them as thieves.
run Benford Law check on all numbers 