Kyle had built his dry cleaning business from scratch. He was proud of the service he gave his customers. He was a detail-oriented man and loved to make sure that there were no stains and everything was neatly pressed and ready at the time promised. His business grew and he hired four people to help him. At first his wife handled the cash register, but then he hired a young lady, Sally, when his wife became ill. He was distraught when his wife passed away, but continued the business.
Dr Defoe from the university called and asked if he could come audit the company. He promised it would just take a couple of hours and he wanted to see how they handled their accounting. Kyle thought he might learn a little, and was eager to show off what he done with his life. He was proud of his business! He didn’t earn a lot, but it was an honest living.
Dr Defoe busily went to work. He was impressed with the organization. Kyle gave every customer a ticket with a number, and the numbers all matched up and the amounts matched up to the penny. Then, as he checked over the deposits, Dr Defoe noticed something strange, something bad. Each deposit was off by a whole dollar value, usually between $100 and $300. Each day, the deposit was short.
He asked Kyle about the deposits and Kyle said Sally put the deposit ticket together and went straight to the bank each day. Sally was called in.
Sally had not been told the Dr Defoe was coming, and was visibly upset when she found out what Dr Defoe was doing there. When Dr Defoe asked why the receipts didn’t match up with the deposits, she turned red and started stuttering “It’s because, because…. of course you trust me, don’t you Kyle! We’ve been together so long! It’s because, of course…” Then all of sudden a big smile came over her face and she relaxed. “It’s the money in the cash box. You know, Kyle, we keep money in the cash box for change the next day! That’s it! It’s the cash box!”
“But,” Dr Defoe countered, “If you start out the day with $200 in the cash box, then take in $1000 in receipts, you should have $1200 in the box. You deposit the receipts of $1000 and still have $200 in the cashbox for the next day. Isn’t that right?”
“Oh, Kyle, don’t let him get away with that!” cried Sally, her chin starting to quiver. “I can’t understand all those numbers when you go through them like that. Kyle, you know we have to have money in the cash box each day. He is just trying to confuse you!” Tears started swelling her eyes.
Kyle was clearly confused. But he didn’t want Sally upset. She was irreplaceable! “Dr Defoe, I’m sorry, but I’ve had enough of this. I don’t know why you are accusing Sally of wrong-doing but I trust her implicitly. I’m afraid I must ask you to leave.”
“Thank you for your time, then,” said Dr Defoe. “I’m very sorry to upset you.”
Dr Defoe went out to his car. As he left, he saw Sally through the window of the window, wiping the sweat from her brow.
Kyle didn’t see that Sally was making over $1000 a week extra, completely tax-free! A brief look-see from an accountant every couple of years is a good idea for a small business to catch this kind of thing. Also, knowing exactly what each person does and occasionally doing their job is also a great exercise.