The best way to ensure that your business is protected and employees are not presented with temptation is to ensure that organizational controls are sound.  No one likes to think that they are being taken advantage of.  Business owners and managers are certainly no different.  Many owners even think of their business and employees as their family, so to consider that a “family” member is cheating you is a dreaded thought.  But one must remember that the only people who ever cheat you are those that you trust; otherwise, you wouldn’t have put them in a position in which they could have cheated you!  Answer the following questions to judge your corporate exposure:  

If you answered “no” to any of the above you may have an elevated risk of fraud in your company.

Example of Risk: Billing Schemes

Billing schemes represent by far the most expensive category of asset misappropriation.  Companies of almost every type, size and industry are vulnerable.  In billing schemes a company pays invoices an employee fraudulently submits to obtain payments he or she is not entitled to receive. There are four major types of such ploys…

Shell company schemes

Shell company schemes use a fake entity established by a dishonest employee to bill a company for goods or services it does not receive. The employee converts the payment to his or her own benefit.

Pass-through schemes

Pass-through schemes use a shell company established by an employee to purchase goods or services for the employer, which are then marked up and sold to the employer through the shell. The employee converts the mark-up to his or her own benefit.

Pay-and-return schemes

Pay-and-return schemes involve an employee purposely causing an overpayment to a legitimate vendor. When the vendor returns the overpayment to the company, the employee embezzles the refund.

Personal-purchase schemes

Personal-purchase schemes consist of an employee’s ordering personal merchandise and charging it to the company. In some instances, the crook keeps the merchandise; other times, he or she returns it for a cash refund.

Fraudulent Billing: It’s Not Small Change

Red Flags for Billing Schemes