Fraudulent invoice scams, or ghost vendors scam hits thousands of companies every month. Many clients we speak with were unaware of how common the problem is for companies of all sizes. This week, even tech giants Google and Facebook were found to have lost over $100 million to this scheme.
It is thought that larger firms have the resources to protect against this type of crime. The problem is that in large companies the complexity and volume of their payments to vendors is many levels of scale higher than smaller firms. Actually, it is much simpler for small and medium sized companies to protect against this type of loss. This is a good thing, since a loss to a smaller company can be catastrophic. While $123 million is an immense amount to lose, a company like Google can withstand the loss. For many smaller cap enterprises, even a mid six figure loss can mean bankruptcy.
A recent client came to us to perform due diligence on an investor who was being considered to be brought in to provide rescue capital for our client. As it turned out, the client was in financial trouble because the bookkeeper had embezzled $46,000 over the past year. This was enough to threaten the cash flow enough to place the firm in jeopardy.
The steps to prevent common losses from fraud or theft are simple and inexpensive. In many cases there is no cost if the company can do most of the legwork on their own.