Don’t Let ‘Accounts Deceivable’ Steal Your Momentum
At Blue, we know as a business owner you’re building something meaningful—and that every dollar counts when you’re fueling your dream. Unfortunately, the risk of accounts receivable fraud—sometimes cheekily called “accounts deceivable”—can quietly derail progress, especially for small and midsized businesses. These hardworking teams often juggle delayed payments without the staff or safeguards needed to spot red flags early through preventive measures.
We’re here to help you stay one step ahead. Below, we’ll walk through four common types of accounts receivable fraud, signs to watch for, and simple fraud prevention best practices that can protect the momentum you’ve worked so hard to build with your small business.
Lapping
Lapping schemes are like a financial shell game.
It happens when an employee diverts a payment from one customer to cover a stolen payment from another. This type of financial loss can go unnoticed until the books no longer balance—or worse, when a valued customer voices a concern.
Example: George, an employee at Hopeland Trinkets, pockets an $800 check from Lucille. He creates a fake business account, “Hopeland Treasures,” and deposits the funds. When another customer pays, he credits Lucille’s account, and so the cycle continues.
Red flag to watch: An increase in overdue accounts or unexplained delays in payment posting, as well as errors in accounts marked ‘non-payment’.
Skimming
Skimming is what it sounds like—taking off the top before anything’s recorded.
In this scheme, an employee intercepts incoming payments—cash or checks—before they’re recorded. They may even try to balance the books by quietly altering expense accounts.
Example: George again. This time, he credits Lucille’s account but splits the $800 as false entries—half to “advertising,” half to “consulting fees.”
Red flag to watch: Expense accounts that gradually balloon without explanation.
Fictitious Sales
Some fraudsters inflate the numbers. Others just make them up.
Fictitious sales can be used to inflate commissions or conceal stolen inventory. While the “sale” exists on paper, the revenue—and product—never does.
Example: George records a $1,600 sale for Lucille instead of $800. He pockets a bigger commission while the company is none the wiser—until the books start showing a mismatch between sales and cash flow.
Red flag to watch: High revenues that don’t align with shipping costs or bank deposits.
Fraudulent Write-Offs
Sometimes, the money leaves the account—but doesn’t come back.
Dishonest write-offs happen when someone fakes a refund or bad debt entry and quietly reroutes that money into their own pocket or a shadow account.
Example: George records Lucille’s $800 customer payment correctly, but later issues a fake $400 refund for “broken merchandise”—payable to himself.
Red flag to watch: A spike in write-offs, especially from inactive or unrelated accounts.
What to Watch For
Fraud doesn’t always wave a red flag—it might just whisper. But here are some telltale warning signs:
- Revenues up, but shipping or deposit activity doesn’t match
- Dormant accounts suddenly active again
- Lots of refunds, voids, or discounts without clear reasons
- Bookkeeping discrepancies
- Expense categories creeping up
- Customer complaints about billing errors
- Employees who resist time off and segregating duties, but prefer solo-control job tasks
- Lifestyle changes that don’t align with salary
Best Practices to Protect What You’re Building
We believe in your goals—and we’re here to help you get there safely. With the right checks and balances, you can create internal controls based on a culture of transparency and trust that keeps your team focused on growth and minimizes the risk of fraud.
- Separate duties: Even simple changes, like rotating who opens the mail or deposits checks, and similar segregation of duties, can deter fraud and similar suspicious activities. At least two sets of eyes should be on every major transaction, coupled with regular audits.
- Automate accountability: Use deposit stamps marked “For Deposit Only,” reconcile accounts frequently, and issue monthly statements for customer accounts.
- Create a speak-up culture: Empower your team with training on types of fraud risks and clear, anonymous ways to report concerns—without fear of being labeled as a whistleblower.
You’re working hard to build something meaningful. And we’re here—your financial copilot—to help you protect it. When your business thrives, your community does too. That’s why we’re all in on your success.
Let’s keep you moving forward—free from fraud and full of possibility.