Documenting theft in a dealership can be challenging and problematic. Theft comes in many forms; there is embezzlement of money, manipulation of dealership records, theft of goods, inventory or products, and theft of information, services or time.
Loss of revenue could be due to intentional theft or might be due to accidental neglect. Generally, direct theft traditionally involves the office manager or an employee working in the accounting department. The office manager has direct access to cash, checks, bank transfers, bank accounts, payables, receivables, payroll, customer information, and vendor relationships and accounts. Any nebulous activity involving these items may be connected to theft in some form. It should be rare that any theft in these areas would not be known to the office manager or controller.
Outside of the accounting office, any employee, including management, could be involved in routine or nonsystematic practices that result in direct loss of revenue to the dealership. Theft also includes indirect activities such as payments to individuals for preferential treatment or approvals related to compensation. This can involve abuse of power or abetting theft through collusion with another employee.
We have found it to be very difficult to detect theft unless it is suspected and/or exposed by an employee.
The first step in evaluating potential theft would include the standard practice of reviewing checks issued and bank statements for any anomalies or inconsistencies. A concurrent review can encompass pulling information and records from the DMS system. After this initial review, there could be as many paths to take as there are forms of theft listed above. While the time to evaluate checks and accounts for monetary theft may be finite, finding other forms of direct or indirect theft can be lengthy and indefinite.
Dealers must be cautious how they add new employees. In a tight labor market, there is always a need for additional employees. When hiring, one of the easiest ways to ensure good employees is to perform thorough background checks of all potential hires. After they are aboard, ensure that there is accountability for every position in the dealership and that no position has broad power to authorize activities without the consent of another individual. It is important for the dealer to reiterate to everyone a testament of anti-theft policies. Any meetings may be purportedly to go over procedures but the real value is making employees aware that security and deterring fraudulent activities is taken seriously.
Authors: Louis Young | [email protected] and George Berry, CPA | [email protected]
Withum’s Automotive Services
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