Business owners turn to fraud to get cash

Some Australian companies desperate for cash are resorting to criminal means, an accountancy firm claims today.

Some Australian companies desperate for cash are resorting to criminal means, an accountancy firm claims today.

Accountancy firm PKF says it has seen an increase in calls in the last two to three months from bankers, accountants and lawyers whose clients are trying to ward off business failure by fraudulent activities.

Ken Whittingham, partner of corporate recovery at PKF, says his firm has seen a huge increase in fraudulent behaviour, which has gone undetected until the company’s books come under scrutiny.

“The banks, accountants and lawyers come to us to turn the business around or to start proceedings like voluntary administration,” he says. “And they haven’t suspected any fraud; but once we start investigating we are seeing it and the incidents have increased dramatically in the last few months.”

He says the business owners are going for an easy fix, and while they know they are breaking the rules, don’t understand the consequences of their actions.

Cases included invoice fraud, directors cashing unauthorised cheques and companies building up huge loan accounts in the knowledge they could not be repaid.

“One recent case included a company director receiving financing from two different institutions for a piece of plant equipment,” he says.

He says banks are freezing accounts too late. “Recently we have had directors who learn that an official liquidator has been appointed and they grab the cheque book, race off down to the bank, cash the cheques and scamper,” he says. “The banks should have closed the accounts faster.”

Whittingham is also seeing directors taking money out of the business. “It’s fine if they can repay it, but when they can’t it’s a different story.”

He also warns that directors not paying their bills will face wind-up orders from clients. “There are a lot of people in denial. They think that they got through a difficult time in the good times and so they keep trading on the blue sky deal down the road coming to fruition. But they are exposing themselves to wind-up orders and the directors can also face a personal bill for trading while insolvent, and exposing themselves to civil penalties and criminal charges,” he says.


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