Skimming Fraud

See Also:
The Fraud Triangle
Larceny (fraud)
Audit Scope
Compliance Audit

Skimming Fraud Definition

Skimming fraud is the theft of cash from a business prior to its entry into the accounting system for that company. Although skimming is one of the smallest frauds that can occur, they are also the most difficult to detect.

Skimming Meaning

Skimming is also known as an “off book” fraud because the cash is stolen before it is entered into the bookkeeping system. In business, skimming is the most difficult to detect because there is not direct audit trail that can be followed to the source. Often, skimming fraud is discovered by accident, or if a company suspects that it is going on. A company will often investigate for skimming fraud if a certain part or the business as a whole is low on cash for no reason. If the problem is ongoing companies will often investigate themselves or hire someone to do so like a Certified Fraud Examiner (CFE).

(How are you’re dealing with a fraudulent employee? Learn more about what it feels like to have fraud committed against you here.)

Skimming Example

Grant owns a sandwich shop named Real Good Wich. Lately, Grant has noticed that the cash account has been dwindling, and decides to hire Mason a CFE to investigate. Mason arrives on the scene and orders a sandwich. skimming fraudAfter observing the cashier for a while he notices that one of the employees is pocketing the cash when the exact amount for a sandwich is paid. Mason takes note of this and returns to Grant and explains the problem. He explains that when the exact amount is paid the employee can simply pocket the cash. This is because there is no need to open the register for change and no sale needs to be recorded. Mason also provides a quick fix to the problem.
If Grant were to provide a free sandwich to his customers if no receipt were given to them on the sale it would significantly reduce the amount of skimming fraud. Grant takes Mason’s advice and fires the employee, and implements the free sandwich. After a while Grant sees that his cash has increased as well as overall profits.
Check out our free Internal Analysis whitepaper to assist your leadership decisions as you deal with fraud AND prevent it before it happens again.

skimming fraud
[box]Strategic CFO Lab Member Extra
Access your Exit Strategy Checklist Execution Plan in SCFO Lab. The step-by-step plan to put together your exit strategy and maximize the amount of value you get.
Click here to access your Execution Plan. Not a Lab Member?
Click here to learn more about SCFO Labs[/box]
skimming fraud

The Accounting Gap Between Large and Small Companies

The Accounting Gap: It’s unfortunate, but true. A large gap exists between the accounting departments of large or publicly traded companies and smaller or private companies. In our past 25 years of consulting we’ve noticed that more often than not, these smaller/private companies will fill the gap with Bookkeepers, rather than the degreed Accountants/CPAs they

Read More »

The Struggles of Private Company Accounting

Building your Accounting Department… When I meet a business owner operating at a successful $10+ mil in revenue I often hear them say “My CPA…” and I immediately know they are referring to a tax CPA. One thing ALL entrepreneurs have in common is that they have to file a tax return. So from day

Read More »

CPA’s are Specialized

The Difference in CPAs Looking back at my career I don’t know how many times I have introduced myself to someone and they ask, “Are you a CPA?” and I say yes. Then they tell me “you must be very busy with tax season” and I look at them with a bit of awe and

Read More »


Financial Leadership Workshop

MARCH 28TH-31ST 2022


Financial Leadership Workshop


June 12-15th, 2023

WIKI CFO® - Browse hundreds of articles