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Business Fraud Attorney – Chicago, IL
Common Types of Business Fraud
When you run a business you have to be on the alert for any type of fraudulent activity. Business fraud can cost your company significant amounts of money, and can even cripple your ability to compete with other companies in the industry. Here are some of the common types of business fraud to watch out for. As always, if you have any questions, please feel free to contact us and let us help set up procedures to limit the exposure your business has to fraudulent activity.
Illegitimate billing invoices
If an employee has control over entering invoices and writing the checks to pay for them, he or she may be tempted to generate invoices for goods or services that were never received. Then he or she may write a company check to pay for those invoices and cash it.
A good way to combat this form of fraud is to separate responsibilities. Never allow one person to hold complete sway over the invoice and billing system. At a minimum, one person should enter invoices and another one should pay them. If you have the manpower, it would be good to randomly check and verify invoices to ensure that they represent goods or services that were actually received by the business.
Inappropriate expense reports
If employees are responsible for submitting their own expense reimbursement forms, some may try to take advantage of this by claiming to have paid more than they actually did for a good or service. In addition, some of them may use this method to purchase goods and services for their own private use.
You should always require a receipt from a vendor before you reimburse an employee for money spent. In addition, you should closely review reimbursement requests, and request more information if the request seems unusually large or seems out of place. It may be a good idea to prohibit employees from paying for business expenses over a certain amount out of their own pocket, thereby eliminating the temptation to pad a reimbursement request.
If your business issues many checks, it is inevitable that some older checks will eventually be classified as uncashed. Whether this is because the recipient lost or forgot about the check or for some other reason is anyone’s guess, but some employees will take advantage of this situation and re-issue the check in their own name.
A good way to combat this is to require two signatures on business checks. An employee is less likely to make a check out to himself or herself if there will be a second set of eyes on it. As with other forms of employee fraud, a major contributor to the problem is allowing a single employee to exercise too much control over the process.
If employee A is in charge of obtaining a vendor, vendor B may be tempted to pay A in cash to select B’s company to provide the needed good or service. This can be especially expensive for the business if B decides to make that money back by charging your business more than usual for the product.
To decrease the chances of this happening, employees in charge of selecting a vendor should be required to document the entire process including the bids they received and their reasons for selecting a given vendor. During their annual review—or more frequently—a supervisor should randomly review some of the vendor selections to ensure that the employee is making the best choice for your business.
If your business is one that sells goods or services for cash, employees may be tempted to take a little bit of money for themselves before placing the rest in the register. To fight this form of fraud, employees should be required to enter each sale into a register that generates a written record of the transaction and keeps a running tally of the amount of cash that should be in the drawer. Further, employees should give customers receipts showing the amount of the item purchased so the customers can see for themselves that the only money they paid was the amount that was given to the business.
Employees and other businesses can be very creative in coming up with ways to defraud your business out of its money. The best way to limit this is by compartmentalizing the authority of employees to keep any one person from being able to do too much. Further, you should institute practices to ensure that there are frequent random reviews of employee actions in order to encourage them to always make decisions based on the best interest of the business and not based on their own best interests.
We are here to help you reduce business fraud. In the event that you are a victim, we may be able to assist you in recovering some or all of the money that your business lost as a result. Contact us today and let us help you protect your business.
Turn to an experienced Illinois business fraud attorney
Gentleman Law has been helping clients with business fraud for more than 16 years. Call (312) 741-1039 or contact Gentleman Law online today to discuss your case, free of charge. The office is centrally located in the Loop near Daley Plaza just steps from the Cook County Courthouse and the federal courthouse. Spanish is spoken in the office for your convenience.