When times are tough, people can get disparate…. As the economy huffs and puffs along, it has left in its wake a surge in business theft, and this trend has had a disproportionate impact on smaller businesses. According to the Association of Certified Fraud Examiners (ACFE), employee theft at businesses with less than 100 employees cause an average loss of $200,000; that’s $57,000 more than the average loss of bigger businesses.
A while back I did a series on employee theft in general- what the effect is, how to spot it, and how it can be prevented within a small business. Recently, much attention has been given to the rise in reported incidents of accounts payables fraud within smaller businesses; so I thought it would be a good idea to cull a few tips on how to spot this kind of fraudulent activity based on the advice of ACFE and experienced auditing companies.
Here are a few telltale signs to look out for:
- Duplicate or similar payments. One glaring red light is repeated incidents of duplicate payments being made for the same or similar amount, to the same vendor, and/or with the same or similar date.
- Invoices just below approval limits. Repeated invoices set at amounts that lie just below the threshold for managerial approval- whether in terms of amount or billing cycle- should be flagged as questionable.
- Rounded-off billing amounts. The presence of invoices for rounded amounts- ie those rounded to the nearest dollar amount. May be a sign of fraudulent activity.
- Fishy vendor information. Some signs to be on the lookout for include: the absence of a phone number, or a home phone, multiple vendors with the same number, and phone numbers that always go to an answering machine; PO box billing addresses or billing addresses that are far away; mis-spelled or similar-sounding vendor names.
- Unusual invoice activity. Bursts or lulls in invoice activity, above average invoiced amounts, and activity occurring at abnormal times are all possible signs of employee theft.