Is Fraud Occurring in Your Business?
According to a 2014 report by the Association of Certified Fraud Examiners, five percent of an organization’s revenue is lost to fraud every year. Most business owners would find this amount to be significant.
As a business owner, do you rely on employees to prep and print checks for your signature? Do you review supporting documentation for correctness before signing? If not, is it because you trust your long-time employee or are you just too busy?
If you’re not carefully reviewing every check your company writes, what are you potentially opening your business up to?
Let’s look at some examples of fraud that have occurred in businesses and review simple steps that could increase your oversight and enhance fraud prevention techniques in your business:
Verify Addresses for New Vendors.On the surface, a new vendor may appear to be legitimate, but instead the address could be nothing more than an address at a UPS store. In this situation, a long-time employee may be visiting the UPS store once a week and picking up the checks to deposit them into his/her account.
How do you correct this? You can do a Google Earth search to look at the address of all new vendors. If the address appears to be a strip center, drive by and give it a closer examination (when possible). Ask questions.
Look for the Obvious.Do you have a vendor whose name happens to be the initials of one of your employees?
Look for Inconsistencies.Do you have a vendor whose invoices just don’t look quite right or consistent? Are some handwritten while others are computer generated? Are the dates on invoices on a Saturday or Sunday? Do some include sales tax while others do not? Do some invoices reference a partial billing, but you have no follow-up invoice?
As an auditor in a former life, these are all examples of fraud I have run across with prior clients. It’s important to implement appropriate controls to reduce the opportunity to commit fraud. After all, fraud is out there – we just have to be aware, alert, and act quickly and effectively when it is found.