Seven Steps to Help Prevent Lapping

Could your company be a victim of accounts receivable fraud? 

Lapping occurs when an employee pockets money from a sale, then uses funds from the next transaction to offset the negative balance. 

Payments from subsequent transactions continue to be applied to previous ones, often leading to significant monetary deficit over time, and the need to involve unsuspecting clients to correct the books. Thankfully, these lapping schemes cannot pan out forever, as the balance only moves to future records to eventually be treated as a mysterious "loss," and never truly goes away.

Your business may already be a victim of receivables fraud if...

• You've experienced record discrepancies
• Have employees who refuse time off
• Receive complaints of misapplied payments
• Have sales that are increasing while receivables remain stagnant

Our friends at Cuini & Panichi CPAs have compiled the following to help make sure your business stays safe from fraud:

Ciuni's Seven Steps to Help Prevent Lapping

1. Assign more than one employee to process accounts receivable payments and post them to the accounts receivable sub ledger.
2. Rotate employees frequently.
3. Mandate vacation time.
4. Audit the accounts receivable collection process at least every six months. Your accountant can provide expert guidance in this area.
5. Conduct a regular review of write-offs, credits and adjustments to the accounts receivable sub ledger.
6. Reconcile the sub ledger and general ledgers frequently.
7. Review the accounts receivable aging analysis to ensure that all accounts are aging appropriately.

As small business financial specialists, we see companies without the necessary controls in place become victims of fraud all too often. Be sure to contact our accounting team to ensure your company's assets are well protected.

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