How to help your customers avoid fraud

One of the key roles of an accountant is to help customers make growth and revenue forecasts and identify areas where there are anomalies in the figures.

A benefit of this overview for companies is that your careful analysis of the financials can sometimes uncover problems with fraud.

What are the risks?

Fraud can happen at any time, but businesses are particularly at risk if they are growing rapidly, taking on a lot of new staff or buying other companies in order to expand. Accountants can help businesses understand what the risks are, and how to mitigate them.

On an individual basis, individual taxpayers can also fall victim to fraud. For example, HM Revenue and Customs (HMRC) has introduced new defensive controls to stop scammers who had been impersonating its most recognisable helpline numbers.

According to the government’s own information since the controls were introduced in April this year, HMRC has reduced to zero the number of phone scams spoofing genuine inbound HMRC numbers. This has resulted in the tax authority already receiving 25% fewer scam reports against the previous month.

Fraud is growing – how can you help your clients?

Fraud is now the UK’s most common criminal offence. It costs businesses billions of pounds ever year and much of it goes undetected until it is too late.

Bookkeepers and accountants can help clients detect and prevent fraud in a number of ways:

• Educating individual taxpayers about how to communicate with HMRC, and why unsolicited calls are likely to be fraudulent
• Becoming the main point of contact with HMRC on your clients’ behalf
• Ensuring that individuals keep proper records and raise any questions with you as soon as they arise
• Encouraging managers to put policies and practices in place which minimise the opportunity for fraud
• Recommending that managers reduce access to sensitive financial information to just a few key staff
• Putting in measures to control and audit petty cash or expenses claims
• Making sure all stock is accounted for, in and out of the company
• Helping managers understand how accounting software can give them greater control over their income and expenditure patterns

Jim Gee, author of Crowe’s Annual Fraud Indicator, estimates that UK businesses suffer a combined fraud cost of over £140 billion. Smaller companies are particularly vulnerable – SMEs lose over £60 billion to fraud.

 “There are a number of actions companies should consider taking to minimise the cost of fraud, including creating a strong anti-fraud culture,” he says. “In any workplace, the vast majority of employees will be honest, but a very small minority may not be.”

By identifying the weaknesses in those processes and systems which might  provide opportunities for fraud to take place, companies can take steps to reduce or eliminate the risk.

Fraud as part of the procurement process

If, as a service to the company, you carry out regular audits, rather than just an annual review of finances, you can help companies identify potential areas of fraud.

“It is not just fraud from outside that businesses need to worry about,” says Laurent Colombant, Continuous Controls and Fraud Manager at SAS. “Occupational fraud, where an employee deliberately abuses company resources for their own gain, is now prevalent in organisations of all sizes”.

To combat this, organisations must take greater control of their procurement process and detect fraudulent activity before it even begins.

 “First and foremost, this involves recognising the risk at hand. Fraud can occur at any stage of the procurement process or during any point of the supplier relationship. This means that one general audit a year is by no means enough to stay on top. Rather, organisations must keep an eye on the entire procure-to-pay process, ensuring regular audits are held to detect any suspicious behaviour.”

Expecting all fraud to be picked up by your employees is a flawed strategy, he says. Instead, using tools like AI and advanced analytics can help companies and accountants sift through large volumes of data in multiple formats, picking up patterns and anomalies which would otherwise be missed and alerting investigators before the actual fraud takes place.

The fraud statistics

HMRC has seen an increasing number of phone scams against UK taxpayers:

• 2016 to 2017: 407 reports
• 2017 to 2018: 7,778 reports
• 2018 to 2019: 104,774 reports

The cost of fraud

• UK businesses suffer a combined fraud cost of over £140 billion
• SME’s lose over £60 billion to fraud.
• Small enterprises lose £38.4 billion to fraud
• Medium enterprises lose £21.6 billion.

Key takeaways

Maintaining regular contact with clients and customers and encouraging them to use technology to simplify their financial records, can help prevent fraud.

SMEs in the UK lose £60 billion to fraud and areas of vulnerability include loss of stock, problems when growing or acquiring new companies, employee dishonesty or fraud, and lack of clear policies and guidelines.

In summary

You can help your clients by identifying potential areas of fraud, sometimes at an early stage, and encouraging them to invest in new software and implement good financial housekeeping.

Marianne Curphey is an award-winning financial writer and columnist, and author of the book How Money Works. She worked as City Editor at The Guardian, deputy editor of Guardian online, and has worked for The Times, Telegraph and BBC.