Sales activities in a company are very important because the company can generate profits to finance the continuity and development of the business. In practice, there is often a problem or risk of fraud that is often found in any company, be it small and medium companies or even large companies.

Fraudulent or fraud that occurs can be in the form of theft or embezzlement, forgery, fraud and so on. In this case, the impact of the fraud is not only in the form of financial losses, but other losses such as loss of trust from external parties (investors and consumers), damage to the company’s reputation, and the high cost of investigations if the case is brought into the realm of law.

Fraudulent that is most often found and often occurs is in the sales process. In the sales process flow, sales have a higher risk. Usually fraud committed by sales is by selling goods that do not match the amount stated in the sales invoice or making fictitious orders so that they can remove the goods from the warehouse with the aim that after the goods come out, the sales will sell the goods to other parties and the money from the proceeds the fictitious order is not deposited with the company.

Baca juga: Fraud, a classic yet complicated company’s problem

Fraudulent can occur at other division!

Not only sales, sometimes many companies also carry out revenue inflating schemes that are often carried out by companies, namely fictitious revenue or fictitious revenue.

This is usually done by making fictitious sales transactions and reinforced by fictitious evidence of transactions and journaling. This scheme takes advantage of a gap in the accrual basis where in an accrual basis, transactions can be recorded without changing hands or cash equivalents, the most important thing is that the ownership rights or economic benefits have changed hands.

Income from fictitious sales will usually be recognized as sales on credit and recorded as an account receivable, because the transaction did not actually exist from the start. The problem that arises later is that every trade receivable is due. What does this type of fraudulent actor do when the trade receivables are due?

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2 examples of popular fraudulent case

The first way is to leave these receivables unpaid, so that over time, they will be journalized into bad debt expense over time. If this happens, the result is that the fictitious income is closed with a loss on uncollectible accounts.

The profit the company gets is by taking advantage of the revenue recognition period. The Company recognizes fictitious income and bad debts in different periods of the year. This is usually done to cover the shortfall in sales targets that occurred towards the end of the period.

The second way is that the company makes a fictitious cash receipt transaction to make it appear that the receivables are collectible. Companies can make transfers of funds from the company’s or owner’s or related accounts to the company’s account and consider the transfer as settlement of accounts receivable from customers. This method is known as kiting.

Kiting is difficult to detect when the company carries out many business transactions with small retail customers whose form of business is an individual company. Individual companies cannot create a checking account in the name of the company, they create a checking account in their personal name. This loophole is exploited by the fraudsters by admitting a transfer from on behalf of someone as a payment for a receivable from one of their retail customers.

Daniel Nugraha
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