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Four simple steps to stop purchasing fraud happening to your business

by , 13 November 2013
Don't think fraud can happen to you? Think again!

That's exactly what Ike Cellular's management thought before they became a victim.
You see, at Ike Cellular, Grace the bookkeeper places all the company orders, checks them and captures the supplier invoices.

When Grace is off, Paula handles the orders on her behalf.
What Paula discovered a few months ago shocked her!
Read on to find out what happened, and how you can avoid fraud related shocks in your company.

Paula discovered possible fraud in the company

Paula noticed that some of the goods that arrived are things the company doesn't stock and wouldn't normally order...
When Paula queried this with the supplier, she learnt these items are often included in the company's orders.
But since the orders are always promptly paid, they've never queried them.

An investigation into the matter revealed that Grace placed orders for her personal use on the company's account!
And since no one other than Grace ever approved the orders or checked the goods upon arrival, her orders had gone undetected for over six months!

Grace had taken home over R150 000 in goods paid for by the company.
This wouldn't have happened to Ike Cellular if they'd followed four simple steps to ensure different people handled different aspects of the company's transactions...

Four simple steps to stop purchasing fraud happening to your business
Enter into formal Service Level Agreements (SLAs) with all service providers. This will protect you when parties don't perform. Ensure that different people handle different aspects of the transaction (as far as authorisation, action and record keeping are concerned) as follows:


1. Authorisation to place an order: Purchasing manager on an order form;
2. Placing of order: Purchasing clerk;
3. Receiving of goods and check against delivery note: Storeroom foreman – also issue a goods received note.
4. Capturing of goods received note into accounting records (e.g. Pastel) and record keeping: Accountant.
 
To eliminate purchasing fraud, turn to Chapter PO1 Purchasing goods and services: Internal controls in your Practical Accountancy Loose Leaf. Don't have a copy? Click here.
 
Until next time,
Philip Rosenberg

PS: Have you booked your place at the Budgeting and Forecasting with Excel Seminar yet? The early bird R1 000 discount ends tomorrow. Click here for more information. 

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