How to prevent Procurement Fraud, Part 1

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How to prevent Procurement Fraud, Part 1
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In todays business world it is exceedingly
important for business owners and operators to
take steps towards procurement fraud prevention.
Procurement fraud costs businesses millions of
dollars every year, losses that can likely be
avoided if certain measures are taken to assist
in procurement fraud prevention. Whether a
business is small, medium or large, procurement
fraud may occur. The following information is
designed to explain how you can take measures to
prevent procurement fraud by taking steps to
segregate duties, by having regular audits and by
using purchasing controls to your advantage.
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Segregate Duties
One way that managers and business owners can
promote procurement fraud prevention is by
segregating duties. In other words, in any
business transaction, more than one individual
should play a role. For example, the person who
starts the purchase order process should not be
the same person who will approve the payment. In
addition, the person who takes the payment should
not be the same person who handles bookkeeping
matters.
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Segregate Duties
Some smaller businesses fail to segregate duties
for their employees, either because they are too
short staffed to do so or because they are simply
too short sighted to do so. Procurement fraud
can start off on a very small scale, but the
costs truly add up and if individuals see that
they are getting away with it they may continue
to do so for years and on a much larger scale.
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Conduct Regular Audits
Segregating duties is an important first step,
but it is not enough for thorough procurement
fraud prevention. Conducting regular audits of
all of the businesss purchasing practices is
vital to preventing procurement fraud. Estimates
by PricewaterhouseCoopers suggest that regular
audits are responsible for the detection of
almost 20 percent of all reported cases of fraud.
Best practices for audits involve having some
that occur on a regular schedule, and others that
are surprise audits so that those who may be
engaged in procurement fraud will be caught off
guard.
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Conduct Regular Audits
If your business is too small to be able to
afford its own internal department tasked with
doing audits, you can still conduct audits by
hiring an outside consultant to come in to audit
your business. Such an individual will typically
examine contracts, financial documents and
internal work processes. Any accounts that do
not reconcile may be a red flag that indicates
that procurement fraud may be occurring.
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Install Purchasing Controls
Another excellent way that companies can engage
in procurement fraud prevention is by having
clear policies that delegate who is able to make
purchases for the business and to have monetary
thresholds for such purchases. It is also a good
idea to keep a list of approved vendors and to
encourage those employees who have purchasing
power to keep their transactions between them and
the list of approved vendors at all times.
Corporate credit cards are another great idea,
and there is software you can invest in that will
help you to keep track of all expenses so you can
see how money is being spent.
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Contact US
If you want to see for yourself the positive
impact that our software can have on purchasing,
be sure to visit the FREE LIVE DEMO page of our
website or try our FREE 30 DAY TRIAL-no credit
card needed.
Purchasing Software for small Mid Market
Purchasing Managers
Business Address
9900 Shelbyville Road, Suite 6B, Louisville, KY
40223, USA
Business Phone [phone]
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