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CAN ACCOUNTING DEPARTMENTS WIN THE FIGHT AGAINST FRAUD?

Magali Michel, Director, Yooz

 

Despite the implementation of increasingly sophisticated security systems, corporate fraud continues to gain ground: half of all UK companies have been victims of fraud in the past two years, according to a survey conducted by PwC.

Not all companies are on equal footing when it comes to the fight against fraud. The human, organisational, and financial means implemented for protection will be completely different for small, medium, or large enterprises.

A common myth is that smaller companies aren’t a target for cyber attacks because they represent a smaller target, yet a Verizon study found that 43% of cyberattacks last year targeted small businesses.

Smaller businesses are in fact the most vulnerable to a catastrophic impact of fraud, with a Malwarebytes study finding that 22% of companies that are attacked cease operations immediately.

No company can escape the danger of fraud, and there is no direct connection between company size and the monetary amounts of fraud.

The fight against fraud must be part of a strategy based on three core pillars: technology, the organisation itself and its behaviour.

 

The technologies used to fight against fraud

The Big Data revolution is enabling the handling and analysis of vast volumes of information, often in real-time, and is helping finance departments detect anomalies in invoices or emails for example and better defend against fraud. Together with Machine Learning, businesses can make it possible for the company to go even further, such as risk scoring its clients and suppliers.

Digitisation, or automation, technologies that leverage AI are the other essential tools and an important part of any effort to mitigate risks. It not only increases speed, but it also reduces costs and improves agility. Creating and organising a rigorous process that includes complete traceability and security makes these solutions extremely effective in fighting fraud.

More advanced technologies RPA (Robotic Process Automation) is another technology based on machine learning and further automates tedious and repetitive tasks. For example, a “software robot” can query databases, maintain records, establish accounting reports, and even process simple transactions. 

Behaviour

Raising employee awareness is one of the most important aspects of fraud prevention. Most fraud takes advantage of a lack of vigilance, a level of employee naivety, or even cooperation within the company or its partners.

 

Two points stand out in particular:

Raising awareness and providing regular training to all departments and every hierarchical level within the company, including top management, is important to highlight everyone’s role and the responsibility they play in identifying warning signs and exposing potential fraud.

It is also important to implement communications that are adapted to each different stakeholder group within the company, reflecting the company’s commitment to fraud prevention, identifying the consequences of not taking fraud prevention seriously and highlighting the benefits of executing well-defined fraud prevention plans and practices.

Communication needs to be presented according to the company’s size, business sector, and internal specifics (work practices and target employees) to avoid the risk of creating a disconnect between theory and practice.

Your organisation

Internal control is certainly not a new idea. Furthermore, companies can leverage the COSO (Committee of Sponsoring Organizations of the Treadway Commission, a joint initiative to combat corporate fraud) framework created in 1992, followed more recently by COSO 2.

 

What does the company gain by actively fighting fraud?

Beyond the understandable peace of mind that security brings and assurance that the company will not become the victim of fraud, security for processes represents a competitive advantage due to its reinforcement of the company’s reputation for reliability as well as a reassurance for commercial partners, employees and customers.

Increasingly tighter regulations, such as Europe’s GDPR, the Sapin 2 law in France, the California Consumer Protection Act (CCPA), and other recent and highly restrictive anti- corruption laws, were first seen by managers as an obstacle or nuisance for their companies, potentially even slowing their growth.

Various types of fraud and embezzlement have been around in companies for a long time, but the issue is typically regarded as something that used to remain more or less in the background, or something that only happens to other, larger organisations that stand more to lose.

The turning point happened at least a decade ago, when authorities categorically asserted that fraud could also be used as a means to finance terrorism and money laundering. Companies therefore progressively began to consider the potential of fraud in their operations. The most responsive and best-organized companies quickly derived a number of benefits:

  1. Client loyalty

Clients will remain loyal to companies that they have confidence in. Rigorous compliance with procedures and the application of a variety of regulations often embodied by standards and certifications reassure the company’s partners and customers and are often even a determining selection criteria for clients and suppliers.

  1. Reduced operating costs

Eliminating exposure to financial risks, avoiding production shutdowns, and even maintaining business activity by mitigating or even preventing fraud all impact the bottom line.

Improving brand image means communicating a company’s fraud prevention practices, how it manages the risk of fraud, and how it shields itself from outside threats contributes to a strong corporate reputation. In the event of a breach, implementing a solid crisis communications plan can prevent further damage.

  1. Promoting the employer brand

Companies reinforce their attractiveness with respect to employees by combining strength and security, encouraging people to dedicate themselves to the brand, and incite interest from job candidates.

 

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Finance

HOW LONG DOES IT REALLY TAKE TO IMPROVE YOUR CREDIT SCORE?

Every time you borrow money in the form of a loan, credit card, hire purchase agreement, mobile phone contract or anything else, your credit rating will be impacted. In much the same way, your credit score is also affected each time you make a repayment to your debt, or miss a payment. The type of impact that each action has on your credit score will determine whether you have a low, average or high rating. Somebody who borrows a small amount of debt and makes all payments on time is likely to have a high credit rating, while on the other hand, if you have a lot of different debts and have struggled to make repayments and been late with a few in the past, your credit score may suffer.

Unfortunately, it’s a lot easier to get a bad credit score than it is to get a good one, and one missed payment can have a huge impact. So, how long does it really take to improve your credit score and what can you do to improve it quickly?

 

Don’t Expect Overnight Improvements

Thinking that your credit rating will immediately jump up once you have a paid a debt off is a common misconception that can leave you feeling disheartened if you work hard to repay debts only to find that nothing has changed. But, don’t worry, as long as you keep going, your credit score will definitely improve over time. Negative impacts on your credit score such as missed or late payments can stay there for six years and hold you back, but after that amount of time, your credit rating should get much better as long as you are still in control of your debt.

 

Paying Off Debt without Missing Repayments

If you have a lot of debt, this can negatively impact your credit rating even if you are making the minimum payment each month. Lenders are less likely to consider you as a low-risk candidate to lend money to if you are already paying off a lot of debt, and this in itself can cause your credit score to drop even if you haven’t missed any payments. As a result, the best thing to do is find a way to pay off your debts faster without it having a negative impact on any of them. Thankfully, there are several options that you might want to consider.

 

Debt Consolidation

Consolidating your debts is one of the best ways to get them cleared off and leave you with less to worry about. If you have a lot of smaller debts that you are dealing with, this can become hard to handle as you try to keep up with which payments are due at what times. In addition, having a lot of smaller debts also means that you are paying interest on all of them, meaning that over the long term, you’re paying back a huge amount more than you actually borrowed.

Consolidating your debts means taking out one loan or credit card that you will use to repay each debt. Clearing all your debts with the new loan means that you will only have one debt to worry about replying and one lot of interest to pay. If you have a bad credit score, you can find loans for bad credit scores at New Horizons. New Horizons is a regulated broker that works with a certified UK panel of trusted lenders to help you find the best loan for your situation.

 

Snowball Method

Another option that you may want to consider if you are averse to borrowing any more money is the debt snowball method. Using this method, you will repay the smallest debt first, then use the money that you would normally pay towards this debt to pay more towards the next debt up, which will get that one paid off faster. As you work through your debts, you will free up more and more money as each one is paid off, so that when you finally get to the largest debt, you are able to pay everything that you would have normally been paying towards all your debts combined straight to that debt to get it cleared quickly. Continue paying the minimum payment to all your debts as normal throughout the process so that you do not cause any damage to your credit score.

 

Debt Help

If you are struggling to make repayments to any of your debts, the above methods might not be ideal for you right now. Thankfully, there is help available. You can work with a company to get a debt management plan where the company will negotiate with creditors on your behalf in order to reduce your payments. Although this might mean that it takes longer to improve your credit score, it can prevent serious damage as the debts are still being paid off.

How long it will take to improve your credit score will depend on your situation and the method that you choose to clear your debts.

 

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Finance

SHOULD YOU TELL YOUR KIDS HOW MUCH YOU EARN?

By Kerry Sutherland, certified financial planner at Alexander Forbes

 

Many parents are reluctant to talk to their children about money, but these are important lessons to help them achieve financial independence when they are older – even if you aren’t a financial genius yourself.

 

As children get older, they notice their friends’ houses and cars of different sizes and have discussions on the school playground about their different holiday destinations. “In the senior phase of junior school, they work out very quickly that different incomes yield different lifestyles and this is usually when the question about income gets posed to parents,” said Kerry Sutherland.

 

Kerry Sutherland

“You can tell them that you understand they have questions about money and how much you earn, but answer it by saying let’s rather talk about what food, toys, stationery, extramural sporting activities cost, and if we can afford them and how, and about saving for things like holidays.”

 

Often the exact number is not meaningful to children, they rather want to use it for comparison purposes. “You need not tell your kids how much you earn, but you can use it as a motivator to encourage them to work harder at school if they wish to achieve a certain lifestyle as an adult,” said Sutherland.

 

When your children start with this line of questioning, Sutherland advises using it as an opportunity to discuss basic financial planning. “Explain to your kids that a lifestyle is not always about what you earn, but that it is also about how you manage your money. You can discuss budgeting, keeping debts as low as possible and of course the compounding benefits of long term savings. It is important to emphasise that it’s not wise to spend all you earn every month as when you reach retirement age, you must have saved enough to see you through your retirement years.”

 

“Telling your child how much you earn so that they can brag to their friends is unhelpful. If it’s to explain why you can’t afford a fancy holiday, then just explaining this will suffice. It’s also not necessary to treat it like a secret. If your adolescent asks, it’s important to be honest, open and authentic in your answer.”

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