How to Spot Financial Fraud in Your Company

When it comes to running a business, financial fraud can be one of the biggest (and unknown) threats. Unfortunately, most people don’t know how to spot financial fraud before it’s too late. Knowing the common signs of financial fraud can help you protect your company from costly and damaging consequences. Below are some of the most common signs of financial fraud within a company.

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Unexplained Transactions and Unusual Spending

One of the first signs of financial fraud is unexplained transactions or unusual spending that does not have a clear purpose or explanation. This could include anything from foreign payments for services you don’t need, to large purchases that don’t benefit the company, or payments made without proper authorization. All such transactions should be investigated immediately, as they could be indicative of fraudulent activity.

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Missing Funds or Assets

Another sign of potential financial fraud is missing funds or assets. This includes anything from cash disappearing from bank accounts to inventory disappearing from warehouses. If there are unexplained discrepancies in your company’s finances or assets, it is important to investigate them right away. Small losses now may snowball into larger losses later.

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Unusual Bank Accounts and Credit Cards

Another sign of potential financial fraud is unusual bank accounts and credit cards that do not belong to anyone at your company. It is important to keep an eye out for any suspicious accounts that may have been set up by rogue employees to funnel money out of your organization without detection. If you find any such accounts, make sure they are reported immediately and flagged to prevent any further transactions using such accounts and credit cards.

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Dummy Vendors

Finally, owners and employees should be mindful of dummy vendor accounts. Like their name suggests, these accounts are not real vendors and set up to benefit an employee and/or someone close to the employee. Often, an individual will establish a dummy vendor account and create false invoices associated with the vendor to funnel money out of the company. Regularly auditing the company’s vendor accounts can expose this type of financial fraud before it is too late.

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Conclusion

Financial fraud can have devastating effects on any business. Knowing the common signs of financial fraud will help you protect your company from incurring unnecessary costs and damages. Keep an eye out for unexplained transactions and unusual spending, missing funds or assets, unusual accounts, and dummy vendor accounts, as these may be signs of financial fraud within your organization. Taking proactive steps related to these fraud signs will help you protect the financial security of your business.

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Contact Montgomery Legal today to discuss your case and legal options. Schedule a Consultation or call (214) 432-6100.