Metal Supermarkets franchise's forensic accountant uses Vigilant's audit trail to convict a thieving employee

by Andy Shaw

vigilant: keenly watchful to detect danger
-The Random House Dictionary of the English Language

Never has Vigilant lived up to its name more than at a Calgary franchise of the Metal Supermarkets chain. Vigilant Business Software's inventory and financial management package helped catch an employee with his fingers in the till.

The employee, nabbed by store owner Cathy Fraser and accountant Lucille Monette, stole over $20,000 from cash sales was subsequently convicted and sent to jail.

"At first we thought something was wrong with the Vigilant program," says Cathy who took over the store from her father Bob, the original owner. "When we did our bank reconciliation we found that our bank deposits were consistently less than the sales on our printed invoices."

After discussion with her part-time bookkeeper, and still not suspecting any wrongdoing, Cathy called in the service of Lucille Monette, an accountant, teacher, and consultant with over 30 years experience handling the finances of a wide range of Calgary companies. She knew Vigilant well and had recommended the program to many of her clients.

Monette went to work on an exhaustive, item-by-item hand reconciliation of a whole month's bank statements. Sure enough, the physical records indicated that sales had been made, invoices generated, and inventory correspondingly reduced. As well, sales from debit and credit cards all balanced with deposits. What was missing, however, was the cash from cash sales. They appeared on invoices but not in bank deposits. That's when suspicions of theft were first truly aroused. A similar review of another month's deposits confirmed that someone was systematically stealing.

Vigilant's Agility

"Although our audit had to be manual, Vigilant was very helpful during the process because we could easily reverse all those sales for which there were no deposits and put them in a special account," says Monette. "That way we had an accurate record that would stand if charges were ever laid."

"What Vigilant also showed us was that while inventory had been taken out, it had not been removed by a sale -- at least not one made by the company," says Cathy. "If we had had to prove that manually, it would have meant days of going through mounds of paper, but with Vigilant it was a matter of minutes."

Vigilant was able to show that a crime had taken place, but by whom?

With only two employees and herself handling cash, Cathy's list of suspects was short. In the end, Vigilant's accurate reporting of transactions plus the employee's own handwriting on an "open" invoice are what nailed him.

Best Practice: Daily Vigilance

But as Cathy ruefully admits, he could have been caught a lot sooner had she been using more of watchful Vigilant's features from the start. "I wasn't cashing out every day which Vigilant allows you do," says Cathy "and that was just inviting disaster. Also I allowed employees access to what we call open invoices. And this is what one of them used to give to a cash sale customer, claiming the printer was broken, and filling it in by hand from what appeared on the screen. But when that customer, by chance, came back to me one day and presented the invoice, saying he wanted more of the same, and I went into Vigilant but it showed no record of that sale.

"Using Vigilant to cash out every day is very important to us now," says Cathy, adding that Vigilant's ability to pump out daily cash reports means no one can hide anything in the system from one day to the next.

Trust + Vigilant

Despite her very bad experience, Cathy says she still trusts her other employees, although not so blindly now. "We're using Vigilant better now so that we don't put temptation in people's way. We've got things set up on Vigilant now so that no one owns a sale. Anyone can finish a sale on the system, so if that particular employee is away at the time the transaction will still be recorded. So that keeps communication open in the store and people honest."

Cathy is now ready to implement other Vigilant features, including security measures and employee codes. Each user of Vigilant to have a unique password and nine levels of password protection are available. This allows owners to control what the employee needs to see. Employee codes can be set up so they must be punched in before anyone can open a till. They also track who sold what and when, and can help spot any illegal activities.

Concludes Cathy: "When you have a system like Vigilant installed, employees know will accurately record what they do and when they do it and know these records will stand up in court, that's a huge deterrent."

Andy Shaw is a freelance writer, broadcaster and international journalist with articles in many business and technical publications.