Expenses, manipulating reports, fictitious invoices and payoffs and kickbacks, Susanna Quirke looks frauds that all small businesses should know to avoid.
Four Barclays big dogs are to be charged with fraud over actions taken during the 2008 financial crisis. But it’s not just big banks that can commit fraud, and not just those in the know.
It’s time to look at fraud on a smaller scale. While tax dodging and lying in financial statements are well documented in the news, it’s the smaller crimes – the everyday ones – that will ruin your SME’s reputation.
So what counts as fair expenses game and what is fraud? It’s common for a mobile worker to round up their mileage, or a CEO to expense a family lunch, or an events worker to entertain friends at a company-funded free bar. While all of these may be socially acceptable – even normalised in company culture – they are also examples of fraud.
Keep a close eye on your employees, higher-ups included. After all, it’s the executives of the business world that are most likely to take advantage of expense liberties; they’re the ones with the dosh.
- Manipulating reports
‘Sandbagging’ – ‘saving’ excess sales or output figures for a time of need in the future – is a common practice among salespeople and seemingly harmless. After all, you’re still reporting the same figures overall – what’s the harm? Unfortunately, you’re also committing fraud.
Lying on your reports or keeping figures back for a future count can result in inaccurate forecasts. In extreme cases, sandbagging sales until report season can help workers earn bonuses that they otherwise wouldn’t have.
- Fictitious invoices
Invoice fraud often originates with anonymous professional criminals. When a company’s information is readily available online – as, so often, it needs to be – it’s all too easy for fraudsters to throw together a fake template. The only way to check some is to cross-reference the bank details with the forged supplier’s. The most vulnerable and targeted group is that of young CEOs (sub-25).
Introducing electronic invoicing – where invoicers must submit via an online platform – can be a good way to sort the wheat from the (criminal) chaff. Or just get serious about your accounting. After all, this is your business’ money you’re talking about!
- Payoffs and kickbacks
Payoffs occur when an individual or business wants to negotiate an advantageous deal with a company. They approach an intermediary – usually an employee – within the company and pay them in gifts or money to influence decision-makers and secure the deal. Kickbacks are similar except that the ‘bribed’ individual receives – instead of an initial pay-out – a portion of the profit gained from the deal as reward.
Under the UK Bribery Act of 2010, a bribe constitutes a gift given to secure a function or service that is supposed to be granted impartially. Payoffs and kickbacks are among the most common forms and must be guarded against.
Fraud is common among small-to-medium businesses – to the extent that it can be hard to sort the legit from the definitely not. Keep your wits about you, one eye on your invoices and the other on your employees, and you should be just fine.