Are You Being Ripped Off?

Here are 10 ways that you might be being cheated…. And what you can do to prevent it.


James and John came into the office one day and were noticeably shaken. James who was the owner of the company had just come from the accountants and received news that his business had lost $400,000 in the previous year. In obvious disbelief he asked if I could help him figure out what the problem was. In our discussion it came out that they had fired one of their bookkeepers in the past year because they suspected her of theft. I wasn’t surprised. While I have found that most people are honest, there is a percentage of the population that is not and might steal from you. Here are some ways that you might be getting ripped off.


Cash: They say cash is king, but cash is also easy to steal. If you have employees handling cash you need to be aware of opportunities for them to cash in themselves. We have all heard of employees skimming a till or cash box at the end of their shift. In one case I had a customer inform me that a staff member was telling customers that the total was a certain amount that she calculated with a calculator that was besides the till. Because the customer didn’t get a receipt, they suspected the staff member of pocketing the cash. Having cash laying around or not accounting for every dollar is a mistake that you might be making and thereby turning relatively honest employees into thieves of opportunity.


Refunds: Refunding or returning goods or services in the POS or credit card or debit machine without an actual customer or product and pocketing the cash is a pretty easy way to evade detection. To prevent this you should be checking your statements regularly for returns and matching them to corresponding records. Recently we had a client who found a staff member going into the business in the middle of the night and running returns through the debit machine. What they eventually found was a loss of tens of thousands of dollars.


Deposits: Stealing money from your cash bank deposits can happen easily if you are not cross checking your daily take with your deposit amounts.


Credit Cards: If you have company credit cards you should be looking to see that each and

every transaction is matched with a receipt. That receipt should be for products or services that you actually buy. One of our clients was able to catch an employee because he found a credit card invoice for purchases at a company that he didn’t use.


Time Theft: Have you ever had an employee that came in late or left early without making

adjustments to the schedule? Every hour a week you are losing to time theft is costing you a

minimum of $1000 per year. Verifying overtime and insisting on changes to the schedule for

missed hours or days is important.


Vendor Fraud: This can happen regularly on high volume businesses. Whether by error or

intention, mistakes on invoices from your suppliers happen. It’s your job to have a system where you or a team member is verifying to see that what you were invoiced is shipped and it is at the same price you were quoted.


Misappropriation of your goods or services: If you are in retail, you are well aware that

shoplifting is a growing problem. Dealing with shoplifters is a non-stop concern, however it is estimated that more theft of goods and services is due to internal loss than external. Theft of your assets including small supplies, tools, and your products that go out the back door of your business or “fall off the truck” as they say in Ireland, can be a big problem. In one case I caught a janitor who was loading his backpack before he left work. In another incident we had a contractor who had employees who were helping themselves to products and leaving the packaging on the shelf. Both were fired.


Fraud: You might not think that this could happen to you, however we were working with a

company recently that was able to catch someone who worked with them who was able to

create documents on company letterheads that enabled them to benefit from contracts worth hundreds of thousands of dollars. Fraud can be expensive for you, your suppliers and your customers. It’s part of your duty to understand how you could be defrauded.


Corruption and Bribery: If you go to a third world country corruption and bribery seem to be a way of life. The same is happening in North America. We are more frequently coming across situations where staff members are being paid money or receiving goods or services to ensure that people or companies receive contracts that are not the lowest or most beneficial to the business. In one case corruption was discovered when two new recreational vehicles showed up on an employee’s lawn one afternoon. If you have staff members putting pressure on people within your organization to buy from certain vendors and you can’t understand why, you may wish to look deeper.


Data Theft and Piracy: If you own a company that deals with information, don’t be surprised one day if you find that one of your employees has sold their passwords for cash. Having IT

companies as clients has opened our eyes to the number of businesses that are paying third

parties to release their data that is held hostage.


There are a number of other ways that you could be taken advantage of including but not

limited to health insurance fraud, false claims for injuries, commission scams, expense

reimbursement scams, use of your vehicles or assets for private use, the list could go on. However, if you have read this article, you understand that your business may be vulnerable to theft, every organization is.


Three things you can do to reduce your risk!

  1. Communicate that you are watching and have systems in place to reduce external and internal threats to your profitability.

  2. Implement systems that segregate functions that involve activities where you could be put at loss. This includes, separating bookkeeping functions to keep people honest. Implementing checks and balances to ensure accuracy and accountability.

  3. Read and audit your own financial statements. This includes ensuring that you are reading monthly comparative income and balance sheets. Asking for more details on a regular basis when you have questions. Be curious about why there are changes in statement items.


By the time James and John had left our office we had determined that the bulk of their annual loss probably wasn’t due to misappropriation of funds, however their labor costs had gone through the roof. They believed that there may have been some time theft and other

challenges around efficiencies in that area and they left with a plan to tackle their issues. They might have been cheated but they couldn’t prove it yet. Can you?


Dave Fuller, MBA, is the author of the book Profit Yourself Healthy and an Award Winning