By Winmark Business Solutions
False billing frauds currently represent the largest dollar losses in small businesses. Unlike larceny, these are not spur of the minute, minor amount crimes. These are premeditated and substantial.
Billing frauds are too numerous to count. Fake payee (shell) companies, crooked vendors in cahoots with employees, or even freelance (non-accomplice) suppliers can be involved. Consider these:
Again, the lack of division of responsibilities in handling payments, purchase orders, checks, bank reconciliations will come back to bite you every time!
Prevention, as always, is the best defense. Phony payments involve a plethora of transactions, and prevention will require some targeted methods depending upon whether payment is to a vendor, a benefit claimant, a customer, or employee.
In the case of shell company fraud, one good way to determine if it exists is to regularly review your Approved Vendor List. How many use post office box addresses? For employee-vendor fraud, check vendor addresses against the payroll addresses. Do any match? Look up unfamiliar vendor names in your phone book. Do they really exist?
The permutations of billing fraud go on forever. Just use your imagination. Pretend you’re a crooked employee and try to figure out how you’d get money out of your business by using your payables system.
Winmark Business Solutions (WBS) is a free Web site for small businesses and entrepreneurs containing over 6,000 pages of business-critical information and downloadable tools at www.WBSonline.com. WBS is a division of Winmark Corporation, a multi-brand franchisor with nearly 900 franchise locations in North America. With over 25 years working with small businesses, WBS draws upon years of experience to bring important small business articles, information, tools, forms, checklists, calculators and downloadable forms to the small business owner to help their business grow. WBS contains over 6000 pages of business-critical information all available at www.WBSonline.com.