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Deterring Fraud

Theft is not always as obvious as a customer stealing merchandise from a retail invoicestore. Internal fraud is something businesses of all types and sizes need to guard against. One common form of internal fraud is false invoicing.

Essentially, an employee creates and submits fake invoices for goods or services that were never provided. Or, legitimate invoices are resubmitted for payment using a bank account the employee controls. Either way, the payments are funneled to the employee’s or to an accomplice’s bank account.

BE ALERT TO POTENTIAL RED FLAGS

There are signs that should alert you that all may not be as it should. Investigate further if a vendor:

  • Provides an incomplete address
  • Lists an address or phone number that matches an employee’s address, an employee’s business address, or the address of an employee’s relative
  • Lists multiple addresses
  • Provides a post office box but no street address
  • Offers deals that are too good to be true
  • Is not on your business’s approved-vendor list

If your vendor list is more than just a few entries and if others have access to it, you should be diligent about reviewing it on a regular (but random) basis.

DEVELOP STRONG INTERNAL CONTROLS

Attentiveness can help deter internal fraud. However, the best protection is to implement a system of strong internal controls. For example, require management authorization for all purchases above a predetermined dollar amount and insist that employees obtain several quotes from different vendors for any large purchase. Finally, make sure purchase orders and delivery receipts are being checked against invoices before making payment.

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