The biggest dud cheque ever…and how you can avoid it

Plenty of businesses have experienced the odd dud cheque, but not many have been hit with duds to the tune of $11.5 million.

Gaming giant Tabcorp was forced to book a provision against an $11.5 million debt, after a prominent gambler cashed dud cheques at a casino then lost the money playing baccarat.

Tabcorp did not view the cheques as unusual, as there are several players who use substantial sums of money in one sitting. The group says the debt affected its half-year financial results, and will be seeking all the money lost.

But experts say smaller businesses also need to be aware of cheque fraud, particularly as the economy slows.

KPMG forensic national managing partner David Van Homrigh says the issue can be helped by ensuring healthy credit practices.

“It’s really a credit issue, not necessarily a fraud issue. It’s about ensuring that there’s not too much money in the way of exposure to a client at any given time.”

“And that’s always a challenge, particularly where you have a large number of transactions in a short term. That’s protecting the business by asking for funds up front, asking for a bank guarantee, which may or may not happen. You’ve got to protect your position by getting your money up front or some other appropriate security.”

Jonathan Dooley, director of forensic at accounting firm Vincent agrees, saying small businesses need to act fast to ensure the security of their business.

“Recognise the risk – which a lot of people don’t think about. Make sure you’ve got someone with the right expertise to develop a risk plan,” he says.

“If a particular business has a risk in relation to dodgy creditors, you’ve got to make sure you’ve got people looking over someone’s shoulder.”

“A lot of the frauds we see committed are fairly basic – the bookkeeper, the accountant, someone using phantom employees and so on. Unless someone’s looking, that will never get uncovered.”

“The problem is with smaller businesses with a few employees and a bookkeeper, there’s no one looking over their shoulder. It’s a risk, and it’s growing especially during this economic climate as people get desperate.

“But you don’t want to spend $100,000 preventing fraud when you’re only a $100,000 business. Get the bang for your buck and make sure you’ve got the right processes.”