You may think you have a handle on fraud in your company, but if you’re not checking out your entire supply chain, you may be in for a rude awakening.
Fraud, theft, and waste can come from so many places, so managers and senior executives need to be especially vigilant. Earlier this year, there was a blog posting on cpa2biz.com written by Marlon Williams, CPA, which offered a number of ways in which fraud and/or waste occur: from employees setting up accounts for inactive vendors and funneling the payments into their own accounts to an inadvertent typo that creates a duplicate payment that goes unnoticed. In that blog, Mr. Williams suggests that accounts payable departments need to constantly review their master vendor file for suspicious activity. Doing so manually can be extremely tedious and time-consuming. Automating the task increases accuracy and the speed with which discrepancies can be caught.
Last month my interest was rekindled when I saw a piece in Forbes, “Companies Are Failing to Detect Financial Fraud in Supply Chains: Deloitte.” The article was based on a recently published Deloitte Financial Advisories Services poll of 2,600 executives which explored how companies were using new technologies and analytics to detect fraud…specifically in the supply chain. Surprisingly, the poll found that many organizations were not putting their invoices and contracts under the right kind of scrutiny; that not enough investigation goes into line item information on invoices, which is where most of the fraud occurs. It’s clear that, more than ever, AP and Procurement need to work closely together to combat the situation. Whether the cause is collusion between a vendor and an employee or supplier misconduct through inflated billing, your company may be losing a considerable amount of capital. What is most astounding about this poll is the percentage of executives who simply responded “Don’t know/NA” to a number of questions:
Q: Has your company experienced fraud, waste, or abuse in its supply chain during the past 12 months? 46.6% responded with Don’t know/NA.
Q: Does your company have a program in place to prevent and detect fraud, waste, and abuse in its supply chain? 32.5% responded with Don’t know/NA.
Q: How often does your company monitor its third parties to prevent and detect fraud, waste, and abuse in its supply chain? 49.5% responded with Don’t know/NA.
These along with other questions present a troubling aspect. Even if you argue that NA is not the same as “Don’t know,” the fact is that the executives responding were attending a Deloitte presentation on the subject of detecting fraud, waste, and abuse in the supply chain, so one might have expected a higher level of awareness. See the full poll for additional questions and answers.
How is your company dealing with fraud? What systems are you employing to detect fraud, waste, and abuse in your supply chain?
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