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4 Types of Business Frauds

There are many types of business frauds, but this article will focus on four of the most common and damaging ones. These frauds include Asset misappropriation, False invoices, Cash larceny, and Skimming. Learn more about these crimes and how you can protect yourself from becoming a victim. Here are some examples of business frauds. You might be surprised to know that there are many more. You might be surprised to learn how easily one of these crimes can compromise your business.

Asset Misappropriation

In most cases, employees in the accounting department are the ones who commit asset misappropriation. These employees have access to company funds and are closest to financial data. In addition, these employees may be motivated by personal financial struggles or a negative relationship with the company. Higher-level employees may be more likely to be a target of this type of fraud, but even lower-level employees can be the perpetrators. A few signs to look out for include excessive irritability and addiction.

Another common type of business fraud is asset misappropriation, which is when company assets are used by employees for personal benefit. Cash misappropriation is easier to identify than non-cash misappropriation, but either type of misappropriation can impede cash flow. Large-scale misappropriation can lead to fines and penalties. Therefore, the first step in preventing asset misappropriation is to prevent it.

False Invoices

Fraudsters target companies based on their size, location and supplier list. They produce fake invoices that look genuine except for a few small discrepancies. Often, these invoices are sent to businesses with an urgent deadline, knowing that Accounts Payable departments are constantly playing catch-up. False invoices are an important sign of fraud and should be investigated immediately. Here are some tips for detecting false invoices and preventing them from happening.

Invoice fraud occurs when a hacker gains access to an email address of a trusted business partner. They then monitor normal business interactions and payment processes. They send a convincing invoice to the business, which usually requires a wire transfer. Even if the invoice is legitimate, the business accounting office may not be aware of it. False invoices can cost you thousands of dollars. The criminal may even target employees to gain access to sensitive information such as the decision-makers’ email addresses.

Cash Larceny

There are various ways in which a company can be cheated out of cash. One of the most common methods involves the theft of company assets. This type of business fraud is most common in businesses that sell products and have an extensive inventory. These fraudulent activities are often discovered when a business conducts stock-taking activities or when people notice that certain items are missing from the store. In order to prevent the occurrence of these frauds, a business should rotate cash handling staff and not place all financial tasks in one employee’s job description.

Another common way of preventing this type of business fraud is to have surprise cash counts. Employees can be paid in cash but may be unaware that their employees are stealing money from the store. Surprise cash counts may also be a good way to prevent larceny. Cash larceny is easier to detect than skimming, but you shouldn’t neglect this type of business fraud.

Skimming

One common way to prevent skimming is to have a visible presence at cash entry points. For example, put cameras in mailrooms and around cash registers to catch wayward employees. This will encourage employees to avoid skimming. However, this tactic may not stop all skimmers. Even if they do commit the crime, they may find an opportunity elsewhere. Therefore, the best course of action is to invest in security measures.

Skimming is a type of business scam that involves removing a portion of cash from receipts for personal use. This is particularly common in small businesses where the owner is also the cashier. The skimming acts result in a tax fraud for the business. Since skimming is so difficult to detect, most companies will discover the problem by accident or by suspicion. When cash in a business is running low, it may begin to suspect skimming and hire a Certified Fraud Examiner to investigate.

Lapping

A common example of accounts receivable fraud is called “lapping.” In this scheme, an employee steals money from a customer and writes subsequent checks to cover the missing funds. The employee must constantly monitor all accounts and avoid stealing from one customer to pay another. The clerk may have a different ID for each customer, so the accounting records will not show this theft. The company’s accounting records will not show that the employee stole money from a customer.

One way to detect lapping is to examine the receipts. If a receipt matches the fraudulent account, it’s a lapping scheme. If you find a pattern of wrong receipts, the employee may be trying to launder money. Lapping schemes can last for months or years. A company may not notice a single transaction until it begins to look for other indicators of fraud. One common red flag is a slow posting of customer payments.

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