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Here are two controls you must implement to prevent creditor payment fraud

by , 23 April 2014
You need to pay close attention to creditor payments. If you don't, you're opening yourself to all sorts of fraud. For example, staff members can change existing creditor banking details to their own; or if they can create fictitious creditors (by using their own banking details) and make payments to the 'suppliers' for goods or services never received. Don't take chances. Implement these two controls today to prevent creditor payment fraud in your company.


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The only way to prevent fraud in creditor payments is to implement these two controls

#1: Implement controls at management level

It's all about authorisation.

The Practical Accountancy Loose Leaf says management must be the only party with the authority to change banking details for suppliers or to add new creditors.

The best way to do this is to create a system where management receives a written request from the new creditor (or the supplier who's changing his banking details), with a letter from the bank or a cancelled cheque to support the new bank account details.

#2: Implement controls at staff level

Make sure staff receives sufficient supporting information from creditors, before they present any changes to management for authorisation.

You must create a standardised form for staff. This'll make it easier for them to collect all the required information upfront.

They must also file the documents together once they've been processed, so it'll be easy to track errors.

'To pick up errors early, make sure that the person who does the filing isn't the same person who does the rest of the recording – fresh eyes are more likely to spot inconsistencies,' says the Practical Accountancy Loose Leaf.


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Keep this in mind when it comes to creditor payments

Your business will be held liable for outstanding repayments of debt, even if errors or fraud have occurred in your creditor banking details.

Your creditors won't be interested in your excuses about why they haven't been paid – they want their cash!

So make sure you implement these controls to prevent fraud in creditor payments.

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