While many businesses believe they are doing all they can to counter fraudulent activity, they often lack the latest data analytics, and that could prove costly. Many companies still rely on old-fashioned human intervention to spot potential fraud, but in the modern era they may well be missing a trick. Data analytics are an excellent tool and can prove to be surprisingly cost-effective.

There are actually numerous tests available to help you identify red flags. Take occupational fraud schemes, for example. You can easily compare purchasing rates between vendors and look for discrepancies or search for vendor preference patterns.

Why not check sales prices and margins by customer? If you find unexpected anomalies or unusual pricing, it could suggest an internal fraud involving a member of your staff. Be on the look-out for ‘kickbacks’ too – expense reimbursements or sizeable petty cash withdrawals prior to an important contract being signed. And it’s often useful to focus on the sums involved in cash payments to agents or customers, as round figures can be revealing of suspicious activity.

Some organisations will undertake a very good data matching test by comparing payroll records (name, address, postcode, bank account details) with records on a suppliers’ list. Any duplications will automatically raise concerns.

You might well think that your internal or external auditors will be doing this kind of work, but have you actually checked that they’re making use of the latest data analytics themselves? Of course, it’s also possible for you to invest in the tools yourselves. The important thing is to be proactive and to avoid complacency that might cost your company a lot of money.

Did you know?

• A typical organisation loses 5% of revenue each year through fraud
• Smaller firms will usually have far fewer anti-fraud controls in place than larger ones
• The more authority a person has within a business, the greater the scale of their typical fraud
• Organisations with specific anti-fraud controls in place reduce losses significantly and detect frauds up to 50% quicker

Source: Report to the Nations on Occupational Fraud and Abuse, 2016, Association of Certified Fraud Examiners

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