Credit Matters Blog

Is Your Accounts Department The Next Target For Fraudsters?

Kim Radok 13 February 2017


The business environment of today is increasingly complex. What is particularly concerning at this time, traditional management disciplines are being ignored. No where do we notice this change more than in the Accounts departments. It appears increasingly obvious that business owners and managers are forgetting their Accounts departments actually manage the business's cash.

Experienced accounts employees working on the front-line of the accounts payable and accounts receivable interactions, understand what I mean. Protecting the organisation's cash just doesn't seem to be a priority these days.

As a consequence, many businesses now operate their Accounts departments short-staffed, with employees on minimal qualifications, and where traditional financial disciplines are mostly ignored. Meanwhile, there is an expectation by management that technology will solve all problems at a minimum of cost and without qualified human support.

What are the signs of a poorly managed accounts department where fraudsters might take advantage? Amongst the many signs are:

(i) there is no one to speak with and to quickly resolve problems, which means you probably have to send an email to a helpdesk which may go unanswered for days or weeks;

(ii) periodically, somebody just closes off old Helpdesk enquiries without checking to see if these have been completed;

(iii) due to a lack of operating disciplines, if a remittance advice from customers is not available, unprofessional or inexperienced accounts receivable employees just allocate the payment as they see fit;

(iv) there are few or no account reconciliations done, which means payment mistakes are rarely found;

(v) customers who demand invoices be submitted or followed up within specified time limits, often refuse to pay old invoices which suddenly appear after the announced deadline;

(iv) lazy or overworked employees knowing that no back up checks are completed, make arbitrary decisions on dealing with outstanding items;

(v when suppliers advise a customer over the receipt of an overpayment, customers often do not respond quickly or seem to care that duplicate or unnecessary payments have been made;

(vi) issues and enquiries which are not resolved quickly the first time, usually require follow up contact which puts greater pressure on under-resourced accounts employees, etc.

(vii) management often ignore warnings about the potential for fraudulent behaviour believing; "... it will not happen in their business!"

In circumstances like these, the fraudsters, slow payers and your own employees can operate with almost impunity. Too often accounts employees defraud their business or fraudsters from outside the business get away with the cash.

If the Accounts department lacks resources, does not have proper operating disciplines or quality employees and relies on sub-standard implementation of technology tools, then fraudsters are likely to be the winners.