Don’t Take Receivables at Face Value
Feb 01,2018
Don’t take receivables at face valueBorrowers often use accounts receivable as collateral for their loans. But how can you ensure that your borrower’s receivables are truly collectible amounts? Lurking beneath the surface may be significant problems that, if not addressed, may lead to default. Do your research and get to know the warning signs that may indicate accounts receivable weaknesses — or even fraud. Evaluating qualityAccounts receivable represent the amount of money that customers owe a borrower for purchases. If a borrower pledges receivables as collateral to qualify for a loan or line of credit, lenders typically claim them to cover losses if the borrower defaults on repaying its debts.Poorly maintained or fraudulent balances hobble the lender’s ability to recover losses, however. That’s why the quality of receivables is important.When evaluating the quality of receivables for a new or existing borrower, begin by computing the days sales outstanding (DSO) ratio. This...
Alert: Email Fraud That Targets Businesses is on the Rise
Apr 01,2016
Recently, we had clients receive emails from what appeared to be employees within their businesses. In these emails, the person made a seemingly legitimate payroll request for employee rosters with social security numbers to be emailed to them. These were fraudulent “spoofed” emails from criminals seeking to obtain confidential data.If you or any of your employees receive an email requesting confidential data from someone in your organization, they should be instructed to immediately follow some simple but critical steps:Look closely at the email address of the person in the “From” field. Sometimes, it is the name of someone in your company but is presented slightly differently (i.e., instead of John Q. Doe as it appears when legitimate, the spoofed email address is John Doe).Click the “from” email name to get the full email address. This may reveal it is from a non-company domain (for instance, instead of from smith-howard.com it...
Borrowers and Occupational Fraud
Oct 09,2014
Every two years the Association of Certified Fraud Examiners (ACFE) conducts a fraud study, the Report to the Nations on Occupational Fraud and Abuse. A typical business loses 5% of their revenues to fraud. The median loss of revenue rose $5,000 from $140,000 to $145,000 from the 2012 study to the 2014 study. Discover which industries are the most fraud-prone and what questions you can ask yourself to better asses fraud risks for your borrowers.Fraud-prone industries Certain industries tend to report more frauds than others. The most victimized sectors in the ACFE’s 2014 study include: Banking and financial services. Lenders are no strangers to fraud. Financial institutions reported the most fraud cases, accounting for 17.8% of the cases in the ACFE study. This sector reported a median loss of $200,000 and is especially vulnerable to stolen cash and corruption schemes. So before assessing your borrowers’ risks for fraud, you may want to turn inward and assess your own risks. Government and...
Danger Ahead! Heed Seven Fraud Signs
Sep 23,2014
Workplace fraud is a legitimate threat around the country. Recent estimates of the cost of employee theft and fraud to U.S. businesses range from $20 billion to $50 billion a year. No business, regardless of size or nature, appears immune. Sound advice: Do not sit around waiting for fraud to endanger your small business. By identifying the areas where fraud may occur and taking steps to thwart it, you may be able to avoid the common pitfalls that plague other employers. Be on the lookout for these warning signs that should set off alarms. No division of payroll duties: The person in your organization who authorizes actions like invoicing should not be the one responsible for completing those payments. Those duties should be segregated and assigned to different employees. Also, a third party should maintain custody of cash accounts. In all cases, rely only on employees you trust.Inadequate recordkeeping: To expose fraud...
Construction Success Story
Aug 25,2014
Stunned Contractor Battles Business Identity TheftBusiness owners do not expect to have trusted employees steal from them. And when we mention "identity theft," most people think of individual identities. Unfortunately, identity theft can also strike businesses — including those in the construction industry. Recently, a plumbing contractor learned this the hard way. Our fraud prevention and detection group offers the following story, with some tips for preventing business identity theft and a Smith & Howard resource to help.A costly exceptionThe married couple owning the business kept a close handle on the books. The couple and their accountant and attorney were typically the only ones with access to the company’s tax and accounting records.But there was one exception: About five years ago, the owners opened the books to a long-time manager who’d gained their trust. He eventually oversaw payroll and other transactions.About two years after assuming this role, however, the manager...
Skimmer Scams Skyrocket
Jun 09,2014
Skimmer frauds cost U.S. businesses billions of dollars annually, according to a report released by the Association of Chartered Certified Accountants USA (ACCA) and Pace University in February. The average loss per skimmer scam was roughly $50,000 in 2011, up from $30,000 in 2010. This trend shows no signs of stopping.Skimmer scams potentially damage a company’s reputation, generate financial losses and compromise its ability to service debt. Although most common among retailers and restaurants, skimmer fraud is a risk for any business that accepts electronic payments.The basicsSkimmers are electronic devices used to read and store electronic data. They may be installed directly on ATMs, point-of-sale terminals and gas station pumps to extract data from magnetic stripes on payment cards. Some schemes use miniature cameras to simultaneously record personal identification numbers (PINs).After skimming electronic data, thieves typically clone payment cards. The phony cards may be used to purchase high-end goods that...
Tips for Preventing Fraud in Your Organization
May 09,2014
If your nonprofit became a victim of fraud, it wouldn’t just hurt your organization’s bottom line — the infraction also could do devastating damage to your reputation. By implementing some simple controls, though, your organization can help protect itself from these risks.Segregate dutiesOne of the most important preventive measures is the segregation of accounting duties, especially those related to executing outgoing payments. You should assign different employees to approve, record and report transactions. And the employee who generates checks for payment or approves invoices shouldn’t also be responsible for signing checks or initiating online payments.Similarly, the staffer who makes bank deposits shouldn’t be charged with reconciling the organization’s bank statements. If the nonprofit is too small to segregate duties fully, consider rotating staff through the various duties regularly, or involving a board member to oversee the process. You also can adopt a mandatory vacation policy to make it more difficult...

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