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To avoid creditor fraud, implement these three control levels in your accounts department

by , 23 October 2014
Using credit to run your business is a dangerous game. If you don't control your creditors and payments carefully, you're likely to end up on the guilty side of a bad debt.

Even worse, it's an easy way for your employees to steal from you. If they create fake creditors, they can trick you into putting money straight into their pocket.

That's why you need to implement these three levels of creditor controls in your business today to prevent creditor fraud...


Implement these three creditor control levels in your business today

1. Controls at management level
At this level, ensure no one executes any transactions without your prior approval. Once you record the information you approved in your financial records, be sure to capture it appropriately by applying your controls. Review the creditors listing and age analysis to keep track of the movements on creditors and ensure your staff follows up on overdue accounts.
2. Controls at staff level
At this level, don't allow staff to approve or authorise transactions. Instead, allow them to sign documents to show they take responsibility for the information. This will also help you identify who was responsible, if you have any queries.
Adequate stationery controls can also assist in reducing risks. Supplier application forms and creditor change forms create an opportunity to add fictitious creditors to the system. Distribute these only when necessary, rather than making them freely available to your staff.
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3. Controls at accounting system level
These controls depend on the accounting system your company uses, but there are some basic concepts you can apply to most.
The easiest ones relate to the use of passwords at various levels. Use certain passwords to segregate the duties of staff. 
Create controls that stop staff from changing their passwords. Depending on the functionality of your systems, it's also very beneficial to use the reports and log-in trails offered by different systems. 
That way, you'll be able to see right away if someone who wasn't authorised to access a particular system, did so. 
These three levels of control will ensure no one in your company tricks you into paying a fake creditor. Implement them today before you become a victim of credit fraud.
Check out the Practical Accountancy Loose Leaf Service for more on managing creditors in your business. 

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