FinanceRegs.com » 3 dumb moves that lead to payment fraud

3 dumb moves that lead to payment fraud

April 30, 2008 by Carol Katarsky
Posted in: Best practices, Fraud prevention, Internal controls, Special report

Best Practices for Controls and Procedures

It may be the thought that’s most likely to keep you up at night: Are we vulnerable to payment fraud?

The answer is: Probably — if you aren’t making use of the powerful resources at your disposal.

Just a few key steps can help you rebuff attempted fraud — and if an attempt does actually succeed, they can help you quickly identify and resolve the problem.

Don’t assume you’re immune. According to a recent study by the Association for Financial Professionals (AFP), 58% of companies with revenues under $1 billion were victims of payment fraud in ’07. That number ballooned to 80% for companies making more than $1 billion.

Although most of the attempts were prevented, those that did squeak through were costly. The median loss was $13,900.

So what can you do to make sure your company doesn’t wind up as a target? One of the best ways is to reduce your reliance on paper checks: 94% of the fraud attempts were focused on checks. Even if you can’t — or won’t — get rid of paper checks completely, you should consider moving at least some payments to electronic methods such as:

  • Wire transfers (only 3% of companies reported fraud attempts)
  • ACH credits (4%)
  • Corporate cards (13%), and
  • ACH debits (26%).

A few tweaks to your internal procedures can also go a long way to prevent fraud from striking your company. Important steps like separating key duties (such as payment entry and payment approval) or deleting former employees’ account access are easily overlooked when things get busy.

And don’t overlook the tools — many of them free or close to it — that your bank may offer. Extra layers of password protection and services such as Positive Pay (and its many permutations) give you additional safeguards. When the bank charges even a nominal fee for these services, it’s easy to dismiss them as just another gouge by the bank. But let’s face it — the bank doesn’t want to deal with fraud any more than you do. You might be surprised to see how willing banks are to negotiate lower fees for any services that offer extra security.

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3 Responses to “3 dumb moves that lead to payment fraud”

  1. Cara Lynn Says:

    Fair article, but I didn’t catch what the 3 dumb moves are. Can someone enlighten me?

  2. Lynne Scott Says:

    my best guess: relying on paper checks, not separating key duties, and not deleting former employees from access. The article seems to be mis-titled, and the advice has not held true in my experience. A boss’s wife, an attempted wire transfer and charges made with a fake company credit card have been the only payment fraud problems I have seen in 30 years of accounting dept experience for various companies.

  3. Learned a hard lesson Says:

    With the recent layoffs, it’s now more important than ever to re-evaluate all checks and balances currently in place. Especially in small businesses where individuals have both payable and receivable responsibilities. Thought we were covered, missed one thing, cost us money.


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