Six ways to help prevent cash receipt fraud.

• Author: Gambrell, Rand
• Position: GUEST COLUMN - Column

In business, cash is king. It's also one of the easiest assets to steal from a company.

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In its "2006 Report to the Nation on Occupational Fraud and Abuse," the Association of Certified Fraud Examiners asserts cash-based frauds accounted for nearly 90 percent of fraud cases reviewed.

Of those cases, nearly 40 percent involved cash receipt fraud, costing the defrauded company $75,000 on average. This includes cash received that is stolen before entry into company records (skimming) as well as cash stolen after it has been received and recorded (cash larceny).

Recent developments in banking law and technology may help alleviate some risks related to cash receipt fraud. In October 2004, Congress passed legislation--nicknamed Check 21--that makes it easier for banks to transfer check images instead of physically transferring paper checks.

In response both to Check 21 and consumer demands, banks have unveiled check-processing technology allowing checks to be scanned and an electronic image of the check remitted to the processing bank instead of the actual check.

Check 21 reduces but does not eliminate the risk of skimming and cash larceny. Even with the application of the new check-processing technology, there are still areas of exposure companies must address to help prevent cash receipt fraud. Here are six areas to consider:

* Though your company has adopted the new check-scanning technology, what if checks never make it to the scanner in the first place? Who in your company receives payments? Is the same person who prepares the deposit the one who scans the checks? If you do not segregate these functions in your company, it may be easy for an employee to pocket checks and exclude them from the batch scanned and transmitted for deposit.

* If your company is small enough that segregating the cash receipt and cash deposit functions is not practical, consider using your bank's lockbox service. A lockbox is a feature in which the bank receives payments directly on behalf of your business. The bank processes and credits these payments to your company's account without your employees ever handling them. If your business receives a high volume of payments through the mail, a lockbox speeds the deposit process and removes the possibility that checks will be diverted before they can be deposited.

* Is the same employee...