Detecting theft 

🚨 How to Spot Signs of Stealing in Financial Statements

🔍 1. Compare Revenue to Deposits

Red Flag: Sales/revenue is reported, but cash deposits are lower than expected.

Check:

• Bank statements vs. reported revenue
  
  

• Are all sales actually deposited?
  
  

• Cash-heavy businesses are especially vulnerable
  
  

📉 2. Inflated Expenses

Red Flag: Expenses seem too high or grow suddenly without a matching business reason.

Check:

• Look for large or recurring payments to unknown vendors
  
  

• Personal items marked as “business expenses” (e.g., groceries, travel)
  
  

• Split transactions (e.g., two $499 charges instead of one $998 to stay under approval limits)
  
  

🧾 3. Fake Vendors or Ghost Employees

Red Flag: Payments to vendors or people who don’t exist.

Check:

• Run a list of all vendors and employees
  
  

• Cross-check names, addresses, tax IDs
  
  

• Look for duplicate or similar names
  
  

📈 4. Unusual Patterns or Spikes

Red Flag: Random spikes in spending, or consistent round numbers (e.g., $1,000, $5,000 repeatedly).

Check:

• Compare monthly or quarterly statements
  
  

• Graph expenses over time—spikes can reveal manipulation
  
  

• Sudden increases in things like “office supplies” or “consulting fees” may be a cover
  
  

💸 5. Missing Receipts or Invoices

Red Flag: Missing documentation for expenses or reimbursements.

Check:

• Ask for receipts to match line items
  
  

• No receipt? No reimbursement.
  
  

• Scan for “Miscellaneous” or vague categories—this is often where shady stuff hides
  
  

📊 6. Gross Profit Margins Are Way Off

Red Flag: Gross margin drops with no reason (suggests either theft or cost inflation).

Formula:

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Gross Margin = (Revenue - Cost of Goods Sold) / Revenue

Check:

• Has the cost of goods spiked?
  
  

• Is inventory disappearing (without sales)?
  
  

• Inventory shrinkage = classic theft signal
  
  

🔐 7. Too Much Control by One Person

Red Flag: One person writes checks, manages receipts, handles payroll, AND does the books.

Check:

• Segregation of duties is key. Even small orgs should divide financial roles.
  
  

• Always have someone else review or audit quarterly.
  
  

✅ Tools You Can Use:

• Excel/Google Sheets → Track trends, highlight large or duplicate payments
  
  

• Bank Reconciliation → Compare books vs. real cash flow
  
  

• Audit Logs (for software) → See who’s entering or editing records
  
  

Bonus Tip: Trust Your Gut + the “Sniff Test”

If something feels off—dig deeper. A paper trail always exists, especially with digital banking.