Teeming and lading – accounting for the miscounted


In the world of accounting and finance, issues of accounting fraud are a huge concern and can result in a distorted market where fraudsters drive out genuine businesses. Teeming and lading is one such form of fraud that accountants, managers, and business owners should keep a close eye on.

Teeming and lading is a form of bookkeeping fraud also referred to as short banking, delayed accounting, or lapping. Although the act does not fall within the definition of theft, it involves the allotment of receipts from one customer/debtor’s account to another with the aim to make the books of the account balance.

How does teeming and lading occur?

Teeming and lading is often used by experienced fraudsters to hide a shortfall of money or conceal a theft. Essentially, teeming and the lading is a strategy that delays a payment deficit from showing up on a customer’s account by moving money around.

Case in point: – an employee may have used money received by a business for their own personal needs and in an attempt to hide such misappropriation of funds, the employee posts the amounts received from a subsequent debtor/customer in that account so that the debtor/customer account does not show an outstanding balance. To make up for the discrepancy, when another payment is made, the handler will deposit that money against the money used for personal needs and fail to show the receipt until a later time to avoid being caught. This process is continued until the original misappropriated amount is restored or the handler is caught.

Teeming and lading schemes can also occur through splitting cheques, where cheques are split up when recording payments in the books of accounts. When encashing the cheques, less amount is credited to the debtor, and the rest of the amount is misappropriated by the handler.

How can one identify teeming and lading?

One of the means through which a business owner can identify potential teeming and lading activity is by contacting debtors/customers directly to verify the information in the business record to flag any potential fraud.

A business owner can also implement bank slip testing, which entails checking and reconciling accounts at the end of each working day to identify and flag any potential fraud. While the most rampant forms of teeming and lading involve hard cash and accounts, the practice can also involve the assets and property owned by the business such as; business stock.

How can we prevent teeming and lading?

Some of the ways through which a business owner can prevent cases of teeming and lading include but are not limited to: –

  1. Reconciliation of accounts by harmonizing all income receipts with the business accounting records, bank statements, and payment slips;
  2. Filling and issuing receipts to customers/debtors to aid in tracking and proving all payments made;
  3. Customer account statements should be maintained and regularly shared with them to flag any discrepancies on the face of it;
  4. If any income is unaccounted for, maintain a separate listing of all individual cheques to allow to identify any missing income element;
  5. Segregation of duties e.g., reconciliation of accounts should be done by someone independent of the income processing.

At Riskhouse International, we have a multidisciplinary team that consists of debt recovery and insolvency lawyers, forensic auditors, and accountants who can help detect any financial irregularities through a thorough financial audit. We investigate matters relating to fraudulent financial statements and other accounting frauds; potentially fraudulent payments; revenue-related irregularities such as revenue overstatement or understatement; matters involving fraudulent disbursements, cash larceny, and skimming; and inventory frauds.

To learn more about this service and to catch up on our other news and alerts you can visit our blog on our website at https://riskhouse.co.ke/blog/.