Procurement Fraud and Corruption – What You Need to Know

Of all the areas within a company that are susceptible to fraud or corruption, the supply chain is one of the most prominent. Whether it’s questionable rebates or potentially troublesome relationships with vendors, there’s no way to eliminate the possibility of these issues with 100% certainty. Companies that take a proactive stance on procurement fraud and corruption will be in the best position to deal with it.

Understanding the Dynamics of Fraud and Corruption

Although these words have very loaded meanings and either action can be very complex in the way that it’s carried out, the dynamics at the core of these issues are often surprisingly straightforward. In many cases, pressure, opportunity and rationalism are the only three factors that need to be present in a business environment for fraud to occur.

The easiest way to fully understand this issue is to look at a realistic example. Given that many companies are still facing various financial challenges, individuals may feel pressure to either deliver specific results for the organization or to secure their own financial well-being. Unless the right controls are already in place, it’s often surprisingly easy for people to carry out actions related to fraud or corruption.

And if someone is facing what they view as overwhelming or otherwise pressing circumstances, it’s very likely that it will be quite easy for them to rationalize their decisions. But just because someone feels that they have a justifiable reason for taking a specific action doesn’t mean that it will turn out okay for the company.

Reactions to Procurement Fraud and Corruption

In the event that fraud or corruption does occur within an organization, they have to decide how they’re going to respond. Unfortunately, many companies take a less than ideal approach upon discovering this type of problem. Even though this type of issue can cause major damage for a company’s reputation, many companies shield the responsible parties from any significant consequences. The big problem with that approach is it sends the wrong signal to the rest of the company.

Preventing Major Issues Related to Purchasing

While figuring out the best way to deal with the discovery of fraud or corruption can be a tricky issue, minimizing this risk doesn’t have to be complicated. Instead, there’s a fairly straightforward way to put the necessary controls in place to curb this kind of activity.

With purchasing software, things like poor record keeping that create an easy opportunity for fraud are eliminated. Because PO software centralizes all purchasing activity and offers controls for things like budget thresholds, it provides safeguards that simply aren’t possible with a manual purchasing system.

Not only can quality purchasing software minimize the risk of fraud, but all of its features will make this department far more efficient. Bellwether Purchasing Software offers this minimized risk of fraud as well as opportunities to increase efficiency within the purchasing department. Contact us today to learn more.