Beware of Low-Tech Fraud

Forward Thinking Business Blog –

Virtually all business owners encounter fraud at some stage. While technology-enabled scams like invoice redirection and telecom fraud tend to grab the headlines these days, traditional low tech scams have not gone away. Set out below are some common examples of low tech fraud along with some tips on how to guard against them.

Payroll fraud

Payroll fraud can be very costly, particularly if issues go unnoticed for a long period of time. Examples include:

• Staff members lying about hours worked or commissions earned;
• Payroll operator keeping a former employee on the payroll and diverting the salary to their own account; and
• Staff member asking for a pay advance and not repaying it.

Measures that can help protect against payroll fraud include having good internal controls with robust approval procedures that are consistently applied, along with checking payroll reports to verify payments.

Expense account fraud

There are various ways in which a dishonest employee can fiddle business expenses – from submitting forged receipts to double claiming for expenses or staying in cheap accommodation but submitting expenses for an expensive hotel. Again, the best way to protect against this type of fraud is to implement appropriate checks and approval procedures before reimbursing employee expenses.

Theft

Theft doesn’t always involve loss of cash. Misuse of company facilities such as photocopying or taking stationery for personal use, inappropriate use of company vehicles, theft of customer information, stock or intellectual property – these are all examples of theft that can cost your business money. Regardless of whether it’s situations like these, or stealing from petty cash or fiddling accounts, theft by employees can be very difficult and time consuming to deal with. As is always the case, prevention is better than cure. Strong policies and good communication can help prevent problems arising. Employees should be aware of your expectations regarding honesty and integrity, your disciplinary code, and the consequences of failing to adhere to company policies.

Supplier fraud

This can occur where a supplier invoices for an amount in excess of the agreed price for a product or service. Supplier fraud sometimes involves collusion with an employee — for example, where VAT is paid to a non VAT registered supplier or an employee accepts an inducement from a potential supplier. Implementing robust procurement procedures is the best way to protect your business against these types of fraud.

Customer fraud

Customers can attempt to defraud your business by claiming that a delivery has not arrived or that a product is faulty, returning a product that they did not purchase from you or even attempting to return a product that they stole from you. While it is difficult to eliminate these types of fraud, policies such as requiring receipts can help to protect you.