Employee Dishonesty

Employee dishonesty losses are a major cause of business failures. It is estimated that 30% of all such failures are due to embezzlement. It is unfortunate that you cannot trust all people with your money, but you can protect yourself by being aware of money theft opportunities that may exist in your dealership. If you are having internal losses of this type, evaluate the employees who have access to cash, checks, and other currency. Be aware if these employees never take vacations or if their lifestyle changes suddenly. The following guidelines can assist you in preventing losses.

Petty Cash:

Appoint controller/office manager as custodian of account.
Limit the amount of funds and amount of withdrawals.
Document withdrawals with vouchers and ensure they are completed and signed in ink.
Withdrawal vouchers must also have manager’s signature of requesting department.
Controller/office manager should reconcile the fund on a regular basis (daily, monthly).
The fund should never be used for cashing checks or cash advances of any type.
The owner/general manager should randomly check the fund for shortages.

Cash Receipts:

A background report (criminal, previous employment, credit, character, etc.) or similar check should be performed on all employees who will handle cash transactions.
Cash transactions should be handled by the cashier and a separate employee should post the transactions to the journal.
The employee in the office who reconciles the bank deposits should not handle cash transactions, including writing checks.
Cash transactions should not be completed without a receipt and the controller/office manager should keep a control log of numbered receipt books issued out.
Limit number of voided receipts and ensure they are approved by controller/office manager.

Checks:

The owner/general manager should randomly open and review dealership mail.
All incoming checks should be made out to the dealership and stamped for “Deposit Only.” Instruct banks to never cash dealership checks.
The dealership should not cash personal checks under any circumstances.
All outgoing checks should made out to payee. Do not make checks out to “cash.”
Blank checks should never be signed in advance.
Store blank checks in a locked safe.
Discontinue use of facsimile signature on outgoing checks.
The employee delivering payroll checks to employees should be different than the person completing the payroll.
The owner/general manager should look for missing checks and verify checks against journal entries unannounced and on a random schedule.
All cash receipts, checks, and currency should be kept in a locked safe until deposited - not in a desk drawer or cabinet.

Credit Cards:

Establish a limit of type and number of cards accepted. Post this information in the appropriate departments in public view.
Establish and enforce acceptable credit limits per customer.
Approval of purchases over limits should be approved by owner/general manager.
Limit the number of credit card imprinters and limit use and access to authorized persons only.

Bank Deposits:

A designated runner should be the only person allowed to pick up the monthly bank statement and deliver it directly to the owner/general manager for review. Another option is for the bank statement be mailed direct to owner/general manager's home address.
The employee responsible for making up the daily bank deposit should be different than the employee assigned to deliver the deposit to the bank.
The actual bank deposit should be reconciled to the prepared deposit slip by a separate employee on a daily basis to ensure deposits are correct.
The controller/treasurer should randomly assist the person who normally prepares the bank deposit. This should be done on a monthly basis.
The employee who maintains the cash receipts journal and prepares the bank deposit should be required to complete daily accounting tasks before leaving the dealership for the night.

A certified public accountant (CPA) should routinely review the books of accounts every thirty (30) days to ensure that transactions are entered and posted daily and that the books are up to date and reconcile. An outside audit should be performed annually. Both types of audits should be on an unannounced random schedule.

Inform all employees who handle cash, credit, checks, and other currency that their records will be audited on an unannounced random schedule.