Fraud is not a common topic in small business but when it does occur the results can be devastating. Fraud can take many forms and be difficult to identify. Every business owner must ensure they are taking precautions to protect themselves.

To give business owners and idea of what can happen, I will tell you three real world examples that I have come across. The details have been kept vague to maintain privacy. Two stories are from my work as an Accountant and one dates to my University years. In that case, speaking to students about wrongful doings was part of the fraudsters community service.


Example 1: The False Supplier

An Office Manager / Bookkeeper receives an email from her boss. The email asks her to e-transfer two suppliers money right away for a big project they are working on and provides the bank account and information for the transfer. This is not a standard practice but it does occasionally occur. The email talked about an actual project and mentioned the bank that they have there operating account in. She quickly e-transfers the money as requested.

The problem? The email server of the Company was hacked and the email was not from the boss but from a con artist. When the boss got an email notice of the e-transfer he called her and they realized what happened. The bank was called within minutes. One transfer was stopped and the other was not. They never got the money back.


Example 2: The Bookkeeper and the False Suppliers

A long-time employee of the Company went into some financial hardship. She was the bookkeeper of the Company and when it got desperate she created a supplier in the books and prepared a cheque. The owner glanced at the invoice and signed the cheque. The invoice was for a legitimate business which happened to be the bookkeepers husband’s but no work had been done. When she wasn’t caught she did it again…..and again. Years passed and co-workers noticed that the bookkeeper was dressing in very nice clothing and driving a luxury car.


Example 3: The Bookkeeper and the Growing Accounts Receivable

An Administrator/Cashier was hired. In this business, customers sometimes stop by and pay cash. The accounts receivable keeps growing but all are individually small balances. After a few years, the accounts receivable has grown significantly and people started to take notice. The employee quickly leaves. Someone new is hired who starts to call clients to collect the accounts receivable. The clients say they already paid – cash.


Overall, it’s not important whether the perpetrator in these examples was caught and received justice. What is important, is that these are based on actual events. Even small businesses need to have controls in place. It does not matter how much you trust your employees.  They are basic measures so that you can protect yourself, your employees and your business.


Scared? Want someone to put controls in place that automate your processes and make the bookkeeping an independent function? Call Alissa at Virtual Heights Accounting.  We can help you put controls into place to reduce your risk of becoming a target or a victim.

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