How billing schemes can wreak havoc on your company

Posted By putri Articles due diligence, prevention

Report to The Nation 2020 notes that the category of asset misappropriation ranks first as the most frequent occupational fraud, with a percentage of 86%. In this category, there are several methods used by fraudsters. The most frequently used methods are billing schemes which count as 20% of these cases, making this method any company’s potential greatest risk for loss.

A billing scheme is a method for fraudsters to steal an organization’s money by exploiting the billing process. One of the modes is that fraudsters would establish a fictitious company (shell company) that appears to be a real supplier or partner or contractor. This fictitious company will be used as a means to channel funds illegally outside the company.

An example of a billing scheme case is the project of PT Waskita Karya Tbk. in 2019. PT Waskita established a fictitious subcontractor company to channel funds from construction projects undertaken by PT Waskita. Four fictitious subcontractor companies would act as if they were working on a project – which is actually done by another company – then the payment given by PT Waskita to the fictitious company was owned by PT Waskita and kept by a number of parties for personal gain.

Uncovering Risks with Due Diligence

The billing scheme case would wreak havoc on your company’s financial health, operational effectiveness, and company reputation. Therefore, public and private companies need to take preventive measures by implementing comprehensive internal controls. One element of internal control is due diligence on potential partners or third parties of the company.

Due diligence is a process of investigation or audit of potential products or investments – in this case, it would be the business to be purchased – to ensure the truth of all reported materials. The idea of due diligence is to uncover potential risks to third parties or potential partners. If a third party is involved in fraud or other errors, the company’s reputation as a partner is also risky, even when the company is not directly involved in the violation. Therefore, due diligence minimizes the company’s reputational risk.

Get to know your vendor

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Using the latest technology to monitor client supply chains, Know Your Vendor allows clients to import their vendors and provides each of them with a questionnaire, which is an important step in the due diligence process. Clients can follow the development of due diligence, and access reports and scores in an easy way. Do not compromise your company, contact us today for more information.