How to reduce the likelihood of fraud within your business

Internal controls are critical to assisting businesses in mitigating their business and financial risks.

A lack of internal controls also creates another avenue for cash to bleed and lose control of your own business.

Below are some examples of business risk exposed in payment processing:

Overpayments to suppliers (on purpose);
Duplicated invoice payments; (negligence or weak system controls);
Fictitious suppliers (fraud and theft);
Paying the wrong supplier (undiscovered errors);
Credit card payments and supplier invoices duplicatedetc.

To help mitigate some of those risks and improve the internal controls environment – here are some methods that can be implemented:

  1. Automate the processing of payments. Do not manually process payments.  Automate it through the system.  This will reduce the likelihood of error and duplicate payments.
  2. Embed internal control checks within the system and outside the system.  Create processes that allow for independent review and approval.
  3. Segregate duties between the person processing supplier invoices and the person processing payments.  The person releasing funds should not be able to process invoices, debit notes or payment processing.
  4. Restrict the Supplier Masterfile database and review exception reports.  Changes to the Masterfile should be restricted to 1 or 2 employees. When supplier bank information is entered into the system, lock the Masterfile database. Generate an exception report from the system so that it will flag unauthorised changes to supplier details, in particular bank account details.
  5. Review all supplier supporting documentation for proof of delivery or service rendered.  Confirm that the documentation is matched and all is in order Purchase Order, Delivery docket and invoice. Verify evidence before releasing payments.
  6. Supplier Statements should be reconciled monthly by Accounts and independently approved by a Manager. Statements also assist with verifying payments.
  7. Any changes to the supplier’s bank account should be verified with a call or email to someone other than the supplier’s accountant.  Speak to the supplier’s business owner.  Something may be ‘happening’ on their side.   

Now, if this topic is a foreign language to you – don’t worry – we have you covered. 

Give us a call and we will gladly explain it to you.  We can dive into where internal control weaknesses exist in your business.

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