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Protect your supply chain and avoid procurement fraud
Procurement fraud is a complex issue covering many prohibited activities, from pre-contract awards to post-contract awards. Sometimes, it is organized within or outside the organization. Growing companies have a higher risk of procurement fraud due to more employees with company credit cards and open offices in different locations. Expansion of companies gives more room for new communication paths and indirect insight into the procurement process. Detecting, investigating, and prosecuting procurement fraud requires a lot of resources that bring about revenue loss. The legal process is quite expensive, and it rarely ends in conviction or loss recovery, especially with large companies. Money lost to fraud suppliers can also be hard to recover, resulting in a severe economic impact on the company.
Consequences of Procurement Fraud
Procurement fraud goes hand in hand with false information and misinterpretation at all stages of the procurement cycle. Procurement fraud negatively affects the economic development of the organization and the country as a whole. This is due to distorted market chains caused by false information. When market chains are distorted, general incompetence and lack of accountability affect trade and foreign investments. This means a loss of revenue sent to potential fraudsters. With an increasing number of competitors, your potential clients are likely to opt for your competitors if your company is involved in procurement fraud
Ways of Spotting Procurement Fraud
Since procurement fraud poses a significant risk for the company's growth and is hard to recover, it is paramount to know how to detect it. If an employee has a sudden unexplained material wealth or receives financial rewards from a vendor, they are likely involved in procurement fraud. You can also check for mismatched invoices when trying to spot procurement fraud. A mismatch in invoices indicates suspicious activities. If a supplier creates an additional invoice to increase the amount they have received, consider it a red flag
There are several ways of preventing procurement fraud in your company. Download this checklist to see how you can protect your supply chain