This post continues on from part 1 and considers other methods people use to commit fraud in small businesses.

fraud

Theft by payment of false payables invoices

This fraud relies on the business receiving false invoices for non-existent goods or services.

The fraudster would then rely on a lack of checking, so that funds are paid to them. In an ongoing fraud, the regular appearance of an invoice from the fake supplier would become normal and there is less likelihood of its legitimacy being checked.

A business can combat this by:

  • Having a purchase order system that is cross checked when a n invoice is received.
  • When an invoice is first received, check that the following are legitimate – ABN, telephone, address, email. If some of these details are missing, that should raise suspicions.

Theft of stock

This fraud relies on a lack of checking during the lifecycle of the stock:

  • Has the stock been checked against the delivery docket?
  • Has the delivery docket been checked against the purchase invoice?
  • Has there been a regular stock take?
  • Have sales and purchase records been reconciled to the stock takes? 

While frauds within a business are often the work of an individual, stock related frauds are more likely than other fraud types to involve collusion with another person. With a stock related fraud the delivery person can assist with altering legitimate paperwork to assist the fraudster.

Motivation for frauds

Frauds most often arise because of other stress in a person’s life. The fraudster may well be a nice person, a hard worker and have no criminal history. However circumstances in their life and the opportunity afforded by their position in the workplace can lead to fraud. The stress may be their own or a family member’s habit (drinking, drug taking, gambling). They may need money to pay for medical bills. The person may simply see an opportunity to “get ahead” that they “deserve”.

Signs to look for

A fraudster could be displaying one or more of the following:

  • Often working late, weekends or unpaid overtime.
  • Never or infrequently takes leave. If leave is taken it is only for a few days or a week.
  • Appears to be a diligent employee that has few or no disciplinary issues
  • Is reluctant to delegate some of their tasks to others
  • Is willing to cover for office staff on holidays, rather than employ a temp. 

In our next post we will look at the issue of fraud in our small clubs.