Businesses and other organizations can fall victim to vendor billing fraud perpetrated by outside parties just as easily as they can be by unscrupulous employees or managers, explains a noted Philadelphia forensic accountant and Certified Fraud Examiner.
An example of this, according to David Anderson, principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley, can be seen in news reports from earlier this year about a New Jersey man who sent more than 70,000 invoices from a phony company to school districts for school books. No such books were ever delivered, but this didn’t stop hundreds of school districts in 36 states from paying $325,000 worth of the fake invoices.
Another common scheme, says Certified Fraud Examiner Anderson, is for a fraudster to send invoices from a phony company to businesses and other organizations for copy paper and office supplies. No such supplies are ever delivered, but again, the wrong-doer expects a certain number of businesses will pay the invoice without checking.
Even real vendors can engage in fraudulent billing schemes. One such scheme, as delineated by Anderson, a forensic accounting expert in Philadelphia with experience in conducting fraud investigations and establishing comprehensive fraud deterrence programs in the Delaware Valley, involves a vendor who quotes special discounted prices such as for office supplies, food, beverages, shop supplies or for janitorial or maintenance services. After a customer begins using the vendor, the discounted prices quickly change on subsequent orders to more normal or even inflated prices. The vendor relies on your being inattentive to the price changes.
An alternative scheme, said Anderson, has the vendor keeping the same prices, but substituting cheaper products (for example, the vendor offers a discounted price on name-brand, high-quality copy paper, but on subsequent orders switches to shipping lower-quality, off-brand paper).
So, how can such fraud be combatted? Anderson, a Philadelphia forensic accountant and principal of David Anderson & Associates, a Philadelphia forensic accounting firm that provides a full range of fraud investigation and fraud deterrence programs in the Delaware Valley, recommends business owners consider the following procedures:
- Require that a purchase order, signed by an authorized employee or manager, be matched to the vendor invoice. The purchase order and invoice should each show the detailed item description, the price per unit and quantities ordered for each item.
- For services, the purchase order and invoice should each show the detailed service description, expected number of hours (if known), and billing rate per hour (if known).
- Also, for item purchases, require that a receiving document (as prepared by the employee receiving the items and detailing the actual items received – quantities and description) be matched to the purchase order and vendor invoice.
- For services, an employee can also prepare an equivalent document to confirm that the services were actually performed.
- Any discrepancies between the signed purchase order, the receiving document and the vendor invoice must be resolved by the authorized employee or manager who originally signed the purchase order. In many companies, if that resolution results in a payment amount that exceeds the original purchase order amount, a higher level manager must approve the change.
If you require the services of a Certified Fraud Examiner in Philadelphia or any other forensic accounting services in Philadelphia and the Delaware Valley, please contact the Philadelphia forensic accounting firm of David Anderson & Associates by calling David Anderson at 267-207-3597 or emailing him at firstname.lastname@example.org.
About David Anderson & Associates
David Anderson & Associates is a Philadelphia forensic accounting firm that provides a full range of forensic accounting services in Philadelphia and the Delaware Valley. The experienced professionals at David Anderson & Associates provide forensic accounting, business valuation, fraud investigation, fraud deterrence, litigation support, economic damage analysis, business consulting and outsourced CFO services. Company principal David Anderson is a forensic accounting expert in Philadelphia who has more than 30 years of experience in financial and operational leadership positions and is a Certified Public Accountant, a Certified Valuation Analyst and a Certified Fraud Examiner in Philadelphia.