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  • Aho & Associates

Cash Transactions Fraud: Is Theft Baked into Your Bake Sale?

How to Protect Cash Transactions

Cash transactions are a major source of revenue for many organizations, from small retailers to bake sale fundraisers to the burgeoning cannabis industry. No PINs or ID checks are required, making transactions frictionless and convenient for buyers. But because it changes hands so easily, cash can be hard to keep track of – making cash businesses especially vulnerable to fraud. Indeed, the National Retail Federation reports retail employee theft causes an average of $1,200 in damages per incident. While that number may be small for a mass merchant with hundreds of locations, for a small business or non-profit organization, such losses can put a significant dent in revenues. The damage adds up: employee theft accounts for 35.8% of preventable losses for retailers, costing some $16 billion nationwide. If your organization or company handles cash transactions, consider putting the following preventative measures in place to keep that cash flowing to the bottom line:

Separate duties. As much as possible, employers should assign different employees to different tasks related to handling cash. For example, point-of-sale clerks shouldn't total daily receipts, make deposits, or reconcile sales and inventory. The concept can be applied even to very small operations: if your child's school is selling Christmas wreaths, assign one parent to keep count of the wreaths, one to supervise the cash sales, and another one to collect and turn in monies and inventory tallies to the PTO treasurer at day's end.

Track and record everything. Businesses should take full advantage of point-of-sale tools to track inventory and sales, and give all register clerks separate logins so individual activities can be tracked; system access should be limited to transactions. Organizations operating without computer systems should use receipt books and printed transaction logs to track sales. Daily reconciliation of receipts and cash on hand, surprise cash counts, frequent inventory counts, and oversight from the finance department in the form of frequent bank reconciliation reports can help business owners detect irregularities quickly. Such routines can also create a perception of vigilance which can help deter crime in the first place.

Avoid understated sales opportunities. Pay-what-you-can tickets, suggested donations, and purchase-with-donation opportunities leave non-profit organizations especially prone to theft, as volunteer or staff sellers can pocket any extra contributions over and above the published price. As much as possible, non-profits should separate general donations from revenues generated by the sale of goods or services.

For further information:

Association of Certified Fraud Examiners: Review fraud risks associated with cash

Related blog post: More best practices for establishing internal controls in a small business

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