The most common embezzlement story is when an employee embezzles from their employer, right? We are taught in our accounting classes some simple internal controls a business can implement to prevent embezzling.
WHO EVER THOUGHT A DESPERATE EMPLOYER WOULD EMBEZZLE FROM AN EMPLOYEE?? I was not even sure what you would call it…reverse embezzlement? Or maybe just theft? In any event, here it is…
In addition to receiving a comfortable salary, this employee (let’s call her Amy) also received tips. Due to the nature of the business, high quality skin care, it was not unusual to be tipped $50 or $100. Amy was very popular and over time had built a word-of-mouth upper income client base that she was very proud of. She thought her tips would increase; however, as time went by, her client base grew and her tips shrunk. She would soon find out what was happening…
There was a very strict tipping policy that prevented the clients from tipping the service providers directly. The clients would add a tip to the cost of the service and pay both together at the front register. This policy was created to avoid any awkwardness a client might feel about how much to tip as well as to prevent the service providers from discriminating against any client due to the amount they tipped. The service provider would never see how much each individual client tipped. The system required two administrative employees to tally up, check & double check the tips and deliver them daily to the service providers.
A few clients asked Amy if she received their tips. Amy did not know what to say especially when these clients’ tips were very generous - $50 to $100. She started putting the pieces together: the owner of the salon started sitting at the front register and would collect the money from the clients. This timing coincided with the period her tips started evaporating. One client who was always a big tipper called Amy the day after her appointment and asked her if she had received her $100 tip. The color left Amy’s face as the client explained that she had paid the owner.
Amy confronted the owner about the “missing” tip – the owner, as expected, denied it. Amy quit on the spot and had little recourse to retrieve her tips. She refused to hire an attorney due to the cost and realized the owner had gotten away with it. She decided to just put it behind her and move on.
However, the wheels of fate are always turning. Within two months the owner closed the doors to the salon and started bankruptcy proceedings.
Amy started her own business and was wildly successful.
Next up? What can an employee do to prevent this?
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