Corporate Fraud – make no mistake, you are a target, don’t become a victim.

“My business won’t be affected by fraud, It’s too small to be a target.” 

“We know our customers and it’s always been ok so far.”

“We try to be aware but we know we don’t do enough to protect ourselves, so far we’ve been lucky.”

These are the kind of statements many businesses come up with when I speak to them about the threats of corporate fraud. The truth is that although small businesses often think they’re not, they are in fact extremely vulnerable, as many fraudsters see them as easy or soft targets.

Focusses the mind, doesn’t it. So what do you need to know.

Types of Fraud to look out for

Fraudsters are extremely entrepreneurial! They’re always thinking of new scams and tricks to dupe unsuspecting businesses. The fraudsters’ top modus operandi is abusing payment methods. A recent scam involves an urgent request by ‘senior/top management’ for a money transfer for a sensitive transaction that tries to bypass normal procedures. A second fraudster poses as a lawyer. Review internal procedures about how transactions are requested and approved. Ensure staff stick to procedures and checks at all times, make it clear that even a CEO/MD would never ask staff to flout these. If in doubt check with your finance director, who should not mind being asked! 

Here are some other key areas & issues to be wary of…

Supplier

Many general supplier scams involve abusing the purchasing process. Suppliers (or fake suppliers) use various methods such as fake invoices, advance fee scams, procurement fraud, insolvent trading and phoenix companies which dissolve/reappear as a different company after receiving the goods but without paying, and telemarketing office supply scams that con employees into ordering, and paying for, unwanted overpriced goods.

Internal

Employee fraud includes scams such as procurement fraud, expenses fraud, false accounting, payment and receipt fraud and even personnel management such as abuse of sick leave and flexi-working as well as asset and information exploitation where employees use the company for personal gain.

Customer

Customer-based scams often use cheque overpayment and reimbursement requests as well as electronic payment and card fraud using stolen cards or cardholder not present tactics. Longer term fraud, where customers establish a trading history before then placing big orders, receiving the goods and disappearing. This type of scam also often targets new online companies, defrauding them in a much shorter timeframe.

IT Scams

Computer software fraud can involve fraudsters pretending to be tech support from big IT companies like Microsoft or Apple. They ask to verify credit card details etc to obtain access to systems. The Microsoft Lottery is also a popular scam – it does not exist.

Assets

Today ‘assets’ are as much our online identity as stock and property. The top scams include ID fraud, IP theft, hacking, account takeovers as well as insider fraud where employees (or third parties) abuse their position to steal cash, credit notes, intellectual property and more.

Other

Business directory, marketing and charitable donation scams use innocuous or rejection documents with small print to trick companies into signing up to their services and ‘donations’ – obviously they’re not bona fide.

My top tips to help your business avoid becoming a victim of fraud

1. Deny requests to dodge proper process (invoicing, payment, delivery). Always ask for invoices, never pay out because you feel pressurised, always get everything signed off through the proper verification processes.
2. Check and (if in doubt) double check email addresses and phone numbers before making transactions. Check for one or two letters difference from a true company email/domain.
3. Look for irregular purchasing patterns, lack of interest in products, bulk buying, delivery irregularities. If in doubt, ask questions about the order or request more ID.
4. Be suspicious of cheques made for more than the order amount, requesting the difference to be transferred back.
5. For online based transactions, set up bank verification systems such as Verified by Visa or MasterCard SecureCode to give added protection.
6. Check credit history of trade customers and research their online reputation – or even publicly filed records such as those at their Companies House.
7. Be wary of emails with internet hyperlinks to click on. Hover over the link to check the web address, if you have any doubts about that web address, type it into Google (NOT your browser) and you may find it is a fraud.

Want more info? Here are my top 10 useful links.

1. Action Fraud is the national fraud and cyber crime reporting centre. It provides useful prevention advice as well as free fraud alerts detailing new scams.
2. Get Safe Online provides business advice to safeguard physical and data security.
3. The Information Commissioner’s Office offers A practical Guide to Online Security
4. The Fraud Advisory Panel provides advice on how to protect your business.
5. Chartered Institute of Personnel & Development provides advice on managing (and mitigating) staff fraud.
6. Experian provides credit checks as well as advice and updates on their ID and fraud blog
7. Financial Fraud Action UK has advice on electronic payments (Cards)
8. The Bank of England website offers guidance on counterfeit cash & currency
9. The Cheque & Credit Clearing Company provides tips to avoid cheque fraud
10. Even more sites and useful information can be found here.

WrightCFO is an outsourced Finance Director consultancy specialising   in part-time FD contracts in the SME market. Contact me for a free consultation.

http://www.wrightcfo.co.uk

sophie@wrightcfo.co.uk

Tel. 0208 943 9027

 

 

Post Brexit currency fluctuation and how to hedge against it – do you have a plan for your business?

The Brexiteers didn’t have a plan, the former PM David Cameron didn’t have a plan – so it’s hardly any wonder that many SMEs don’t have a plan for a Brexit-vote landscape…

Well, we need one now and we need it fast. A lot of my clients who run SME’s are suffering the immediate impact of currency fluctuations and the pound falling through the floor against the dollar to levels not seen for 30 odd years. The bottom line is no one can plan effectively if you’re at the mercy of fluctuating markets and panicked bankers.

So here’s my advice in two steps. Step 1 is how to develop a currency strategy, Step 2 specifically looks at ways and means of minimising your exposure to currency fluctuations. In these uncertain times, these could easily mean the difference between profit and loss for internationally trading companies.

Step 1: Have a plan

1. Don’t panic! The Brexit process will take at least 2 years so get a short term plan in place as an interim measure to hedge against the currency risk and ensure you have enough cash flow and credit lines to see your business through these uncertain times.
2. Start talking to your suppliers and customers to reassure them of your position & dispel all the misinformation that’s around.
3. Consider your exposure to the currency risk by establishing what you are expecting to pay for, get paid for, in what currency and when.
4. Understand how exchange rate fluctuations will impact our incomings and outgoings.
5. Establish goals such as an ideal exchange rate that allows you to remain in line with your business’s budgetary projections – know your best, worst and expected projections so you can create your currency policy.

Step 2: Ways & Means of hedging against currency fluctuation

1. Internal hedging – if possible given the company cash flow, buy and sell in the same currency at the same time.
2. Forward hedging: sell a set amount of foreign currency at a pre-agreed exchange rate up to one year ahead but beware – the date is fixed so make sure your suppliers are reliable.
3. Price and sell your products in the foreign currency in exchange for cash in advance at the current market rate and transferred within a couple of days.
4. Agree an exchange rate with your suppliers for future orders.
5. Consider a bandwidth where contracts can be renegotiated if exchange rates move beyond an agreed area of tolerance (unlikely with EU countries but possible for softer currencies).
6. Insist payments are made in GBP.
7. Open a foreign currency account and rarely convert to GBP – ie match buying and selling in that country from that account, thereby minimizing exchange rate effects.
8. For big purchases, buy when the rate is favourable and hold the currency in a specialist foreign exchange business account.
9. Check transaction costs of exchanging funds from a local currency as they can be hefty.
10. Consider Currency Protection products – although beware as they can be expensive
11. Get advice from a foreign exchange specialist.

And finally… don’t forget to look for opportunities!

Take advantage of the drop in Sterling – use it as a positive for incentivising overseas buyers!

WrightCFO Ltd is a Financial Consultancy specialising in part-time Finance Directors for SMEs. Call or email me to discuss your business.

Highly Commended Best New Start-Up, Richmond Chamber of Commerce 2016

Tel: 07817 784 603
Twitter: @sophieLwright
Email: sophie@wrightcfo.co.uk
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