A recent fraud case in Concord, NH, is just one example of how employees can overstate or create fictitious sales, costing a business both money and its customers.
Concord, NH (PRWEB) April 30, 2012
Companies across the country have submitted their annual tax filings this month, but as they double check the numbers and send off their tax forms, how many have reviewed their books for potential sales force fraud, such as overstated or fictitious sales?
While large companies often have accounting departments where multiple bookkeepers check the work, small businesses can often only afford one person to keep track of accounts. Are the first indicators present: Has an employee’s commissions increased more than others in the same department? Has the company monitored its uncollected sales? Should the company perform a random survey of customers?
A recent fraud case in Concord, NH is just one example of how employees can overstate or create fictitious sales, costing a business both money and its customers.
A lawsuit filed earlier this month in Merrimack County Superior Court on behalf of the Maryland-based computer consulting firm Micro Focus alleges that Concord employee Timothy Livingston submitted more than $535,000 in fake invoices, netting Livingston nearly $50,000 in fraudulent commissions and bonuses.
Micro Focus discovered in the fall of 2011 that seven of his invoices were past due, some dating as far back as October 2010. In the next few months, the company worked with Livingston and the clients to get the invoices paid, but during that time Livingston displayed a number of signs that hinted toward something suspicious.
According to court documents, Livingston often refused to communicate about the invoices in writing and told Micro Focus he would handle the matter himself. He provided inconsistent answers and continually put off the collections department’s efforts to fix the matter.
In one case, Micro Focus alleges, Livingston presented the client with an estimate for services far below what Micro Focus would have approved. Once the client signed the lowball invoice, Livingston altered it to a higher amount more in line with what Micro Focus charges, pulling in a $8,698 commission. After the purchasing company was notified about the discrepancy, it told Micro Focus it wanted to take its $44,000 annual account elsewhere.
While no business likes to think its employees would commit fraud, Hi-Test News sees that there are a few ways to safeguard your company in the coming year, including overstated or fictitious sales.
1. Monitor uncollected sales. Does one employee have a greater amount of uncollected sales than others in his department? Adopt strict policies for monitoring uncollected sales.
2. Be aware of the signs. Is an employee living beyond his means? Is she having financial difficulties? Is there a suspected drug or gambling addiction? Other signs include defensiveness, control issues, being overly conscientious, divorce and family problems. While none of these signs mean an employee is stealing, it always helps to communicate with staff about problems you may see arise.
3. No company should allow one employee total control of all transactions. Review the financials yourself or look for an accountant with fraud prevention training who can recognize warning signs and identify inconsistencies.
4. Train employees on the signs of fraud and how to report it. Set up a system that allows employees to anonymously report possible fraud without fear of retaliation. This helps develop a culture of integrity and raises awareness of unethical behavior.
5. Review the appointment book or work orders. How do they compare to the work order history? Has there been a sudden increase in sales for one sales person. Stay involved with your business and talk to your employees about the day-to-day operations.
6. Contact customers on a random basis.
Keeping an eye out for warning signs, setting up safeguards and closely monitoring financial documentation can help protect your business from fraudulent activity.