The Filing Cabinet That Exposed a $200K Embezzlement

Sometimes the biggest financial discoveries don’t happen during audits — they happen when you literally trip over the evidence.

This is the story of how an overloaded accounts payable clerk, a pile of paper checks, and a gut feeling led to uncovering a $200,000 embezzlement — that had been happening in plain sight.

🏭 A High-Revenue Business with Too Much Going On

We were working with a $50M+ lumber mill — a big, busy operation with a lean administrative team. Like many high-revenue businesses, the focus was on production, not accounting.

The AP clerk? She seemed… flashy.
New car. High-end clothes. Fresh tech.
All of it a little too expensive for her role. I noticed, but I was drowning in my own work. So I ignored it.

Until the day I walked into her.

📦 The Accident That Changed Everything

I wasn’t paying attention and bumped into her as she carried a stack of checks and the monthly bank statement back to her desk. Papers went flying.

I bent down to help her, and that’s when I saw it:
A check made out for $5,000 — to herself.

She had labeled the payment in the accounting software as going to the owner, who often took draws. No one ever questioned it.

And because we were still using mailed bank statements with check images (this was years ago), she was able to fly under the radar.

But something about that check felt wrong.

🔍 The Investigation

That night, I waited until everyone left.

I pulled the check from under the filing cabinet and looked it up in the software. Sure enough — coded as a payment to the owner.

When I ordered more check images from the bank and compared them with the records, a pattern emerged:

• Multiple checks per month
• Always labeled as “Owner Draw”
• Endorsed and cashed by the AP clerk
• All forged with the signature stamp (which she had access to)

Total loss? Just over $200,000.

🧨 Why No One Caught It Sooner

This is the danger of high-revenue, fast-paced businesses:

• The owner was taking regular draws, so those transactions didn’t raise flags.
• The AP clerk had access to both the check stock and the signature stamp.
• There was no monthly review of transactions labeled “Owner Draw.”
• Everyone was “too busy” to question what seemed normal.

If you don’t have time to investigate red flags, you’ll pay for it later.

🛠️ The Fix: Checks & Balances (Literally)

After we discovered the fraud, we implemented:

• Strict separation of duties in AP
• Monthly review of all “Owner Draw” entries with the owner
• Removal of physical check-writing ability from any single employee

Digital approval processes for all payments

✅ Key Takeaway:

You can’t afford to ignore your gut — or your financial systems.

If something feels off, it probably is. And if no one is checking your books with fresh eyes, that’s a risk you’re choosing to carry.

Want to Find the Financial Flaws Hiding in Plain Sight?

Book your Profit Protection Audit now.