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Sales Team Fraud: Learn How To Prevent Them

According to ACFE, a typical organization loses 5 percent of its annual revenue because of fraudulent activities. To meet the expectations of investors or management targets, sales teams are often caught pulling off fraud or misrepresenting their results. As a leader, you don’t want to be blind to the deception your sales team can execute.

Today, we’re going to run down the most common sales team frauds and how you can prevent them. Let’s get started!

Creating Fake Invoices

Some sales teams often create fake invoices to boost sales. Those fake invoices show that the sales team is doing better than it is. However, the fake invoices pile up and create a devastating effect on the company’s overall sales performance.

One of the sneaky ways some sales teams pull off this fraud is by creating lower-value fake invoices. Since smaller invoices are less likely to be audited, it allows the culprit (sales team) get away with the act most of the time.

To tie up the ends, some sales teams also create other fake documents to prove that those invoices are genuine.

Fix:

Verify the purchase directly from the customer and create an independent confirmation system for the proof of purchase.

Don’t let the sales reps and sales managers get away with simply reporting the number of sales. In fact, proof-of-purchase documents should be required on file for every sale.

Misclassifying Sales

For making up the sales targets, many sales teams misclassify sales. Sales teams include income like investment income as a part of the sale to boost the numbers. This only acts as a one-time gain and destroys the company’s operations in the long run.

It’s simple to confuse the other revenue options with sales. That’s why many sales teams do it so that they don’t have to answer for their shortcomings.

Sales reps and even some sales managers can be leading this fraud in your company. Here’s how you can prevent it and stop your company from bearing more losses.

Fix:

Get your sales team to draft a detailed report on their sales. From total revenue generated to the number of goods/services sold, everything should match up with what’s in the sales revenue account of your company.

Round Tripping

Round tripping refers to your sales team selling certain goods or services to another party and promising to buy back from them at a later date. This act generates revenue in the short term but negatively affects the company in the long run.

This back and forth of shifting the goods or services is often pulled off by the sales teams to offset substandard performance. In reality, round-tripping hurts the company and creates only a temporary boost in revenue.

Sales teams use advanced round-tripping techniques to ensure their higher-ups stay unaware of their fraudulent activity. Here’s how you can prevent round-tripping in your company.

Fix:

Nobody pays a commission on fake sales; make sure that all the sales presented to you are linked to a commission. Spot the sales with no commission and ask questions to the sales managers about who’s behind this activity. If your business is on a smaller scale, close the deal yourself.

Dialing Fake Leads

Sales reps get a commission on turning a lead into a customer. In the pursuit of increased commission, some sales reps call fake leads and label them as customers. In reality, they are just turning your company’s sales department into a fraudulent one.

It isn’t hard to dial fake leads and create a fake report about how you are turning them into potential clients. For an experienced sales rep, it’s child’s play. Especially in a manual sales environment.

Here’s how you can get rid of this fraudulent activity and make sure that your sales department is helping your company generate revenue.

Fix:

Use a Lead Response Management tool that automates your sales sector. With an LRM system, your sales reps will automatically get calls from genuine leads. They’ll automatically interact with them rather than manually handling the sales operation.

LRM tools also record the call of your sales reps so that you can revisit and analyze them later to spot any lacking.

Not Recording Discounts & Offers

This trend is seen in a majority of sales teams that they delay the recording of discounts and offers. Sales teams bill the customers at the full price and then redeem the offer or discount only when tracking cash received from the customers.

This fraud by sales teams creates a temporary boost in sales figures, but in reality the extra amount is being laundered. With mutual bonding and agreement inside the sales team, the extra amount is distributed amongst the culprits.

Finally, when it comes time to audit the revenue of the company, auditors can easily spot this pattern and pin blame on the person in charge of the company.

Fix:

To catch this fraud, you can create a bridge between the finance and sales sector of your company. Install an accountant to looking over sales with respect to ongoing discounts and offers. Ask the accountant to keep a strict eye over what’s being reported by the sales team and what’s actually been depositing in the accounts of the company.

Closing Bad Deals

Just like we previously mentioned, some sales reps are all about closing deals, regardless of the type of deal.

These sales reps close deals that shouldn’t be closed. They just take the information from the customers and somehow close the deal without even keeping in mind the main goals of the company.

It hurts the company’s reputation, values, and traditions. Moreover, it also negatively impacts the overall report of the sales sector.

Fix:

Keep an eye on your sales reps; they are the face of your company. You can do so by listening in and analyzing their calls. Although it’s not possible in a traditional sales environment, you can integrate a Lead Response Management system that offers immediate solutions.

Final Words

At Callingly, we help the companies to prevent sales team fraud. Callingly is a Lead Response Management tool that automates the lead call back process and provides powerful analytics on how your sales team is performing.

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