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

Does your Accounting Department Produce Net Income?

Coaching the Entrepreneur: Learn how to know what you don’t know. How much should I spend on accounting for my company?     I have been in the accounting profession for 32 years, and for the last 6 years, I’ve owned my own consulting firm to assist companies with accounting challenges. There is one common theme that I

Read More »

Is Mexico the New China?

In the wake of the COVID-19 pandemic and escalating tensions with China, American companies are actively seeking alternatives to mitigate their supply chain risks and reduce dependence on Chinese manufacturing. Nearshoring, the process of relocating operations closer to home, has emerged as an explosive opportunity for American and Mexican companies to collaborate like never before.

Read More »

IP Valuation & Monetization For The C-Suite

Intellectual Property (IP) defines and protects the sources of goods and services in the marketplace, the products and services offered for sale and the content surrounding such offerings.  Whether trademarks, patents, copyrights, or other IP, it is critical that C-Suite strategy drives and shapes the creation, valuation use and monetization of all its intellectual property.

Read More »


Financial Leadership Workshop

MARCH 28TH-31ST 2022


Financial Leadership Workshop


August 7-10th, 2023

WIKI CFO® - Browse hundreds of articles
Skip to content