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How to Prevent Sales Fraud

2018-11-15 10:01 Thursday


Fraud, in the corporate context, generally refers to the behavior of employees who take advantage of their position or work to violate their duty to the company and seek personal gain.

Sales Fraud

The performance-oriented sales department often encounters issues related to fraud during periodic performance reviews. However, if companies recognize common sales fraud methods, they have the means to combat it. Below are three of the most common sales fraud practices:

1. "Borrowing" and exchange of sales among employees. Employees who fail to meet sales targets will often borrow sales from an overachiever, ensuring that both  employees receive bonuses.

2. Asking acquaintances to pretend to be customers in order to artificially boost sales totals, and then allowing the "customer" to receive a refund in another in which the employee’s sales totals are sufficiently high, thereby allowing employee to meet their performance review every month.

3. Colluding with familiar customers, by granting them refunds on the grounds that they were not satisfied with the service, and then sharing the refund with them.

The above-mentioned fraudulent behavior not only leads to losses for the company, but can also seriously harm the credibility of the company's appraisal system. If the company does not strengthen internal controls to prevent the fraud, the behavior can erode a company’s reputation from the inside. Furthermore, sales fraud is highly secretive and difficult to guard against. Nonetheless, there are steps companies can take to better protect themselves:

1. Establish and strengthen the compliance culture. In developing a corporate compliance culture, employees' personal behavior should be consistently aligned with the company's development goals.

2. Rewarding employees for disclosing fraud. This is an important procedure that strengthens internal monitoring mechanisms. When corporate oversight capabilities are limited, encouraging employees to act as whistleblowers can unleash a stronger, more durable compliance environment.

3. Establishing a compliance department, directly responsible for monitoring internal commercial bribery, corruption and fraud. Companies should take legal measures to prevent sales fraud, including measures that are  stricter than simply "firing" the relevant employees. For large companies, establishing a dedicated compliance department can actually save money in the long run.

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