Six Most Common Types of Business Fraud


Usually, it’s already too late before the business discovers that they have been a victim of fraud. It can be loyal employees stealing from the company, or something more serious. If you can relate, and have been a victim of business fraud, click right here to discover how a lawyer can help you with your dilemma. On the other hand, keep on reading if you want to find out what the most common types of business fraud are.

1. Illegal Use of Business Funds
This is popularly known as embezzlement or larceny where the person in-charge of funds have been using it personally and without the company’s approval. This can be a bookkeeper using the business money for personal needs. Usually, this type of business fraud remains a secret, because the business owner would rather not share this to the public as it can lead to embarrassment. Thus, they usually try to settle the problem in their own hands by talking to the embezzler instead.

2. Kickbacks and Payoffs
This happens when the employees accept cash or other benefits in exchange of information or allowing someone to access the company even if that person is unauthorized. This often leads to the scenario where the employer pretends to work for the company just so he can get the incentives by “selling” the company he works for to the other person. Usually, it’s hard to discover this kind of fraud until it’s too late– unless you already have an idea of what the person is doing and would try to catch him in the act.

4. Internal Theft
This type of fraud involves stealing the company’s assets, such as products and office supplies without paying for them. Usually, this could lead to inventory shrinkage because no profits can be earned, while the capital is being taken away.

5. Check Tampering
Some employees use the company checks to send money to themselves. These employees usually reissue old uncashed checks and write their names on them. As an employer, you should hire someone who would review the checks before they are signed, and if possible, make sure that all checks are signed. This would make it harder for the employees to tamper the check, as it’s hard to duplicate the signature.

6. Expense Reimbursement
Another type of fraud would be employees submitting additional expenses that never occurred in the first place. To prevent that from happening, employers should make it a habit to ask for the receipt of reimbursable expenses, and if something seems suspicious, they should not hesitate to as the employee about it. Likewise, having a supervisor to assess and recheck these expense reports can also be helpful. Through this, they’ll be able to identify if the expenditures listed were accurate. Aside from that, don’t let your employees create a false account that would allow them to bill the company for non-existent services. Invoices should be regularly reviewed, and make sure that they’re tied to specific services or goods the company offers. Those who are part of the accounting department should also be monitored, and let them take vacation time every now and then. If the accountant refuses to leave her desk, this should raise a red flag.

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