Has Your Business Been a Victim of Fraud?

Often times we hear about businesses that scam their way into the consumer wallet, or large corporations that engage in shady business practices to defraud clients.  But internal fraud is starting to become prevalent in business as well.

Employees, contractors and even management are capable of misusing funds, over-billing or engaging in deceptive purchasing practices: Employees can find ways to bill a company for personal expenses or unperformed work, Contractors can easily get away with material misuse or bill padding, Management and purchasers might set up personally beneficial vendors that will benefit the offender while increasing costs to a company.


In Canada, fraudulent cases can be especially damaging and pervasive.  According to a combined study between the Association of Certified Fraud Examiners and Dr. Dominic Peltier-Rivest CFE of Concordia University in Montreal, Canada is especially hard hit by fraud where the average Construction Fraud case amounts to $625,000.  Construction Fraud is not even the the industry hardest hit by fraudulent cases, it trails Fraud in Real Estate and Billing Fraud for most costly frauds to an industry.

Take, for example, the role of a purchaser in your company who is responsible for procuring goods and services for your business.  Usually a business will have a list of established vendors but a purchaser may have the freedom to establish connections with new vendors or might be in charge of the vendor list completely.  For those who work in government procurement or with corporate purchasing, these contracts can be worth millions, if not billions of dollars.

It would not be terribly difficult for a purchaser in charge of a particular budget to choose a vendor based largely on how they could personally benefit.  A purchaser could theoretically even create a fake vendor, buy goods from a established vendor, and then have their company purchase goods from the fake vendor instead. The offending purchaser will have just pocketed the markup while bringing up the cost to their company.

Having a purchasing system in place that allows for budget monitoring and spend tracking can help prevent fraud.  Implementing approval routing to funnel requests to trusted managers can help bring down unnecessary or fraudulent expenses and a streamlined system will help make accounting and reporting much more efficient when it comes time to pay taxes.  There is nothing more certain than taxes and death but having a grasp of company spend will help with tax breaks and the headache that comes with accounting.  Stop the cash leak: Get your business spending in order!

What do you think?

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