Office supply fraud scams are a sneaky type of vendor fraud that generally use behavioral psychology and often depends on poor internal office communications for their “success.” Although they may not result in huge financial losses for defrauded organizations, falsified invoices can add up to many thousands of dollars. Fortunately, office supply fraud is preventable.

How Scams Are Perpetrated

Office supply fraud schemes typically begin as telemarketing fraud, with someone calling your organization to obtain your street address and the name of an employee. Callers may:

• Ask for the “person in charge”
• Claim to need information to complete an order
• Pretend to verify an office machine’s serial number

 
The goal is to get a name that will lend legitimacy to bogus shipments and invoices. For example, a supplier might ship boxes of poor-quality gel pens and then, a week or two later, send you a pricey invoice. The delay is intentional: The fraudster hopes you won’t notice the final price is much higher than you’d pay for better quality products. The scam perpetrator is also hoping you or your employees have used some of the pens and will feel obligated to pay for them.

Some pretenders offer to send a promotional item, such as a coffee cup. Before they hang up, however, they may mention in passing that they’re going to throw some printer ink cartridges in with the free coffee mug. What fraudsters don’t mention is that they’ll also throw in a bill for the ink and expect you to pay it.

Watch out, too, for the popular “gift horse” scam. In this example, a perpetrator sends a promotional item to one of your employees and follows up by sending unordered merchandise to you. When you receive the bill with the employee’s name on it, you question the employee. The scammer is hoping the employee will be so nervous about accepting the promotional item that you’ll end up believing the worker mistakenly ordered the merchandise.

It Takes A Team Effort To Prevent Office Supply Fraud

Keeping your organization safe from office supply fraud requires a team effort. Instruct all employees to transfer telemarketing calls to one or two designated buyers. And provide those buyers with formal procedures for documenting and approving purchases. They should also have a system for generating purchase orders or internal reference numbers. Designated buyers need to instruct vendors to include those numbers on their shipment documents.

When you receive merchandise, your receiving department should inspect it to make sure you ordered it and that the packing list matches the box’s contents. Then, make sure that the end receiver in your office looks closely at the contents to verify their quality and quantity. If everything is in order, your receiving department should send a copy of the bill of lading to accounts payable for reconciliation with the order.

Treat It Like A Gift

It’s important to know the law in these circumstances. Your organization isn’t required to pay for any shipment you didn’t actually order. You may treat the unordered merchandise as a gift and are entitled to keep it without paying for it. If vendors claim otherwise and try to collect on their invoices, you may need to get your legal counsel involved. For more information about avoiding fraud and creating internal controls, contact us.