What should companies do to prevent cash skimming?

To effectively prevent cash skimming, implementing strict physical inventory counts is essential. Cash skimming refers to the theft of cash before it is recorded in the company's accounting system, which can be particularly prevalent in businesses that handle cash transactions. By conducting regular and thorough physical inventory counts, companies can identify discrepancies between recorded sales and actual inventory levels, thus uncovering potential indicators of cash skimming.

Physical inventory audits serve as a control mechanism to ensure that all cash transactions are properly accounted for and can reveal missing merchandise, which may suggest that skimming has occurred. In addition, these counts can help companies establish a clear audit trail and maintain greater oversight of their inventory and cash handling practices.

While using electronic payment methods can mitigate some risks associated with cash transactions, it does not eliminate the potential for skimming in cases where cash is still accepted. Similarly, merely reviewing payroll systems or increasing inventory levels are not directly related to addressing the issue of cash being misappropriated before it is recorded in the financial system. Therefore, regular and strict physical inventory counts effectively create a check against the fraudulent activity of cash skimming.