Picture this: You’re a business owner with a lot on your plate. You need to make sure your products and services are top-notch; you’re constantly networking; and you’re always looking for ways to grow your business. Amidst all of that, you also have to track your expenses and revenue – Bookkeeping can be tough!
Naturally, you’re always looking for new and creative ways to grow your company. But, unfortunately, accounting scams against businesses of all sizes are on the rise, so it’s important to know the warning signs.
Below, we’ll discuss the three most common types of scams that you should watch out for. We’ll also provide tips on how to avoid them and protect your business.
What Types of Accounting Scams Could Affect Your Business?
An accounting scam is a fraudulent scheme that uses accounting techniques to illicitly gain money or property. Some of the more common ones include false billing, embezzlement, and payroll fraud.
Typically, employees or managers with access to the company’s financial records are the ones most likely to run these types of scams. In some cases, outside consultants or vendors may also be involved.
Accounting scams often involve complicated financial transactions, and as such, they can be difficult to detect. However, some red flags can tip you off to the most common three types:
- Fake invoices
- Phishing emails
- Employee theft
If you suspect an accounting scam is happening, it’s urgent that you take immediate action to prevent further losses to your business.
1. Fake Invoices
One of the most common accounting scams is the fake invoice. A business is contacted by someone claiming to be a supplier, vendor, or partner. The scammer then sends an invoice for goods or services that were never provided. This can be convincing if the invoice looks like it comes from a legitimate company.
If you receive an invoice that you’re not expecting, don’t automatically assume that it’s legitimate. Instead, take a close look at the details to see if anything seems fishy. If you’re unsure whether an invoice is accurate, contact the supposed sender to confirm the services. And always be sure to double-check invoices against your own records to make sure that they match up. Another way to avoid this scam is to set up strict invoice approval procedures, allowing only authorized individuals to sign off on invoices before they’re paid.
2. Phishing Emails
Phishing emails are one of the most popular ways that scammers target businesses. In a phishing scam, a scammer sends an email to a business that appears to come from a legitimate source, such as a financial institution or online service. The email will often contain a link or attachment that directs the recipient to a fake website that prompts them to enter sensitive information, like login credentials or credit card numbers. Scammers may also use phishing emails to infect businesses with malware, giving them access to sensitive, confidential data.
It is essential to know the signs of a phishing email to protect your business. These include:
- Unexpected personal or financial information requests
- Grammatical errors
- Spoofed email addresses
Do not click on any links or attachments if you receive a suspicious email. Instead, contact the supposed sender to confirm whether or not the email is legitimate. You should also report the email to your local law enforcement or the Federal Trade Commission.
Phishing scams are constantly evolving, so it’s crucial to stay up-to-date on the latest scams and trends. You can do this by following reliable sources of information, such as the Department of Homeland Security’s Cybersecurity and Infrastructure Security Agency.
3. Employee Theft
As disappointing as it might be to hear, employee theft is a significant problem across all industries. In fact, it’s one of the leading causes of fraud. Employees may feel pressured into wrongdoing to make up for the company’s financial struggles, or they may simply be looking for an easy way to make money. Employee theft can take many forms as well, from embezzlement and kickbacks to timesheet fraud and expense account abuse. And while these may seem like small-scale misdemeanors, employee theft costs can quickly add up. The average loss per fraud case is more than $140,000.
There are a couple of ways to reduce the chances of employee theft in your business, such as:
- Segmenting certain business duties and process so that no one person has sole control over all aspects of transactions
- Establishing clear policies and procedures for expenses, invoicing, and payroll
- Conducting background checks on all employees to help identify red flags prior to hiring
Having these controls in place can help deter fraud and make it easier to detect if it does occur. By being proactive, you can protect your business from costly consequences.
However, if you do find that an employee has stolen from your business, it’s essential to take immediate action. This may include terminating the employee, reporting them to law enforcement, and pursuing civil action.
Protect Your Business Against Scammers
If you’re like most people, the word “scam” probably conjures up images of email schemes or door-to-door salesmen. But scams can take many forms. Unfortunately, accounting scams in business are all too common, and they can have devastating consequences for organizations of all sizes and designations.
Don’t forget to take steps to protect your business from at least the most common types of scams by:
- Firstly, carefully vetting any new employees or contractors handling your finances,
- Secondly, staying vigilant and monitoring your financial statements regularly,
- And finally, if you suspect that something might be amiss, don’t hesitate to reach out to your professional, trusted accountant or financial advisor for help.
While no business is immune to fraud, you can take steps to reduce your risk. By being aware of the most common types of scams and taking precautions, you can help to protect your business from becoming a victim.
Do you suspect you may be a victim of an accounting scam, or would you like to discover more ways to safeguard your accounts? Contact us today at Remote Accounting Experts to learn more.
