How to Determine if Employees are Skimming Cash

Cash is king when it comes to employee theft. Cash skimming is one of the most common forms of employee theft, also known as internal theft, for both retail and restaurant businesses. It can occur anywhere money is received by the business and is extremely difficult to identify because there is often no record of the transaction or the records have been tampered with to hide the missing cash. While preventative measures and proper cash handling procedures should be top of mind to minimize this type of fraud, knowing what to look for in terms of red flags can be invaluable at identifying dishonest associates that may be skimming profits from the business.

What is Skimming?

Skimming refers to the theft of cash from the register or point of sale prior to the cash being entered into the employer’s accounting system, meaning the cash is diverted from the business to the employee. There are a number of different ways that skimming can occur including avoiding ringing in a transaction, ringing in a “no sale” transaction to open the till, or improperly applying voids and/or discounts to account for the missing cash.

Unrecorded Sales

This type of skimming occurs when an employee completes a transaction without ever ringing it into the POS system. The employee takes the cash from the customer and gives the customer merchandise but there is no record of the sale in any system, the customer does not receive a receipt and the inventory is unaccounted for. Employees may also only ring up a portion of the sale and pocket the remainder of the payment. Declining inventory levels without a corresponding rise in sales may indicate that one or more of your associates is using unrecorded sales to steal cash from the business.

“No Sale” Transactions

Employees may ring in a “no sale” transaction to open the drawer and pocket the cash within. Managers can often catch this type of skimming by comparing daily cash reports, looking for unusual cash shortages. Once aware that the problem is occurring, managers and/or operators can utilize transaction history to identify when unusual “no sale” transactions were rung in and pulling CCTV video of the event to confirm whether the employee took cash from the till.

False Voids and Discounts

Another way that employees can skim cash is by entering false voids or discounts into transactions and pocketing the difference. For example, a customer may pay full price for a product, but the employee applies their employee discount to the order and pockets the difference. Likewise, employees may simply void the transaction after receiving the cash from the customer and pocket the cash for the entire order. This type of skimming can often be detected by a sudden rise in voids or discounts in the POS.

The Best Way to Identify Skimming: Cash Penetration by Employee or Location

With so many different types of skimming, it’s important to monitor many different metrics and KPIs including the ones mentioned above. However, perhaps the best way to identify potential fraudsters is by reporting cash penetration by employee. This report should show what percentage of sales are paid for with cash by the employee and/or location. This will help to identify problem stores and associates who may be skimming cash from the register.

For example, if your typical cashier averages 30% cash transactions, you may say that an acceptable range is 20 – 40%. Any employees that fall outside of that threshold for a given timeframe may warrant further investigation. This can mean digging deeper into that associate’s use of discounts, voids, error corrects, refunds, “no sale” transactions, or even CCTV video review.

A similar report can be run to identify cash penetration by location. Even one dishonest associate can drastically impact the average cash penetration for the location. One Agilence customer found a location where just 11% of transactions were paid in cash (far below the norm for this business), and that nearly half of all cash transactions contained a void or error correction. After identifying the dishonest associate responsible, the location's average cash penetration returned to 30% in just two weeks.

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