Phase 1 — Classic Fraud Schemes · 9 min read
4 · Inventory Theft and Cash Skimming
The two oldest schemes — taking product before it is recorded, and taking cash before it is deposited.
01Skimming before the books
Skimming is the theft of cash before it is recorded, which makes it invisible to any reconciliation. The sale never appears, so the missing money cannot be reconciled against anything. It is detected only by comparing what was sold against what was banked — and by watching the lifestyle of the person who handles the register.
- Cash deposits consistently lower than the volume of cash sales the business should generate.
- Declining gross margin on cash-heavy product lines with no change in pricing or cost.
- Inventory shrinkage concentrated in high-value, easily resold items.
- A pattern of voids, refunds, or no-sales on the register tied to one employee or owner.
02Inventory taken after the books
Inventory theft after items are recorded shows up as shrinkage — the difference between what the books say should be on hand and what a physical count finds. Persistent, growing shrinkage in specific categories is a finding, not a cost of doing business.
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1 · Owner Withdrawals Disguised as Loans
Cash taken out of the company and recorded as a loan receivable instead of a distribution or salary.
2 · Gift Cards and Concealed Personal Spending
Gift cards bought as business expense and converted into anonymous personal spending power.
3 · Undisclosed Debt and Pledged Assets
Loans taken against company assets without partner knowledge or consent.
5 · Customer Payments Diverted from the Business
Customer remittances redirected to an account the company does not own.