When your business is in the startup phase it is almost certain that the founder(s) will know where every single penny is being spent. Accounts Payable Fraud Can Fool Anybody.
When your business is in the startup phase it is almost certain that the founder(s) will know where every single penny is being spent—it’s the nature of financial scarcity. But as your company grows, this becomes unrealistic and could become counterproductive if you neglect sales. You have to establish procedures that ensure timely and accurate payment to vendors. But despite doing everything you should, fraud and mistakes do happen.
The $8 million e-mail
Advance Publications is the 46th largest private company in the United States with over $7.6 billion sales and 29 thousand employees. The company has been in existence since 1922 and the owners are billionaires.
Last year, the accounts payable department received an e-mail from one of their vendors indicating that future payments should be directed to a new bank account. Fair enough. These changes do happen from time to time. But $7,917,667.93 later the company realized they were the victims of a pretty simple scheme by conman Andy Surface.
The execution of the fraud was not elaborate or highly sophisticated. It was actually pretty simple:
- Mr. Surface established a company, naming “Quad Graph” to be intentionally confused with the real vendor “Quad/Graphics.”
- He opened a bank account for his company.
- He sent an e-mail to the A/P department at Advance Publications.
- He waited for the money to roll in.
Clearly there was a breakdown in procedure in several places for this to occur. But if it can happen at a large corporation with significant resources, it can certainly happen to you.
So how can you prevent this type and other types of accounts receivable fraud?
Want to read more tips on avoiding fraud? Check these out:
Speak to your vendors
In the case of Advance Publications, many months went by between the time the fraudulent payments began and the time the two companies started talking to each other. Call your top five vendors regularly to ensure that everything is running smoothly. One phone call could prevent a multimillion dollar embarrassment.
Go to the article: Accounts Payable Fraud Can Fool Anybody
