Accounting Fraud: The Warning Signs Every Bolton & Manchester Business Owner Should Know

Accounting fraud causes devastating damage to businesses. Companies collapse, investors lose money, employees lose jobs, and suppliers go unpaid. What's worse is that many of these disasters could have been prevented if warning signs had been spotted earlier.

Recent data from PWC's Global Economic Crime Survey reveals that nearly half of UK organisations experienced some form of fraud in the last two years. With fraud now accounting for over a third of all UK crime, Bolton and Manchester business owners need to know what to look for.

At YRF Accountants, we've helped local businesses strengthen their financial controls for over a decade. Here are the critical warning signs that could save your company.

Why Accounting Fraud Matters to Your Business

According to the Association of Certified Fraud Examiners (ACFE), accounting fraud causes the highest financial losses of any type of business fraud. Even more concerning, 42% of frauds are only discovered by accident or through employee tips not through formal audits or controls.

The infamous Wirecard scandal in 2020 and the Madoff case in 2008 both had obvious warning signs that were ignored for years. In both cases, people raised concerns that went unheeded until it was too late.

For Bolton and Manchester businesses, the message is clear: spotting the signs early can mean the difference between protecting your company and watching it crumble.

Red Flags That Appear Before Fraud Happens

These warning signs suggest your business might be vulnerable to accounting fraud in the future:

Weak Internal Controls

Watch for:

• No separation of duties (one person handles too many financial tasks)
• Missing audit committee or inadequate financial oversight
• No code of ethics or anti-fraud policy
• Lack of whistleblower channels for employees to report concerns
• Unusually low audit costs compared to similar companies
• Sudden changes in auditing firms before contract ends
• Ongoing conflicts with auditors

We've seen local companies where the same person processes invoices, makes payments, and reconciles bank accounts. This creates perfect conditions for fraud because there's no independent check on their work.

Financial Pressure Points

Warning signs include:

• Excessive debt (debt-to-asset ratios above 90%)
• Poor cash flow despite growing sales
• Difficulty meeting loan covenant targets
• Pressure to meet aggressive short-term targets
• Bonus structures that reward risky behaviour
• Complex transactions that are hard to understand

Leadership Red Flags

Be concerned if you notice:

• Management obsessed with meeting quarterly targets "at any cost"
• Hostile or aggressive reactions to questions about finances
• Unwillingness to discuss financial performance openly
• Frequent disputes with suppliers or banks
• Key staff living beyond their means or in financial difficulty

Red Flags That Suggest Fraud Has Already Occurred

If you see these signs in your financial statements, fraud may have already happened:

Balance Sheet Warning Signs

Critical indicators:

• Very low current ratio (struggling to pay short-term debts)
• Debt levels that seem impossibly high
• Assets or liabilities that don't match business reality
• Unexplained changes in major balance sheet items
• Subsidiaries registered in tax havens with no transparency

Income Statement Red Flags

Look out for:

• Revenue growing but cash flow staying flat or declining
• Consistent sales growth while competitors struggle
• Sudden performance spikes in final reporting quarters
• Revenues that don't match inventory levels
• Expenses being capitalised inappropriately

A Manchester retail business showed 30% revenue growth but their cash position got worse each month. Investigation revealed they were recording sales before customers actually paid, inflating their performance to secure a bank loan.

Unusual Accounting Practices

Red flags include:

• Recording revenue before products are delivered or services completed
• Moving expenses between accounting periods to manipulate results
• Unusual journal entries, especially at period ends
• Missing documentation for significant transactions
• Frequent adjustments to previous financial statements

How to Protect Your Bolton or Manchester Business

1. Implement Strong Internal Controls

The single best defence against fraud is proper internal controls:

Separate duties – Different people should handle authorisation, recording, and reconciliation
Regular reconciliations – Bank accounts, supplier statements, and inventory checks
Approval processes – Require multiple sign-offs for significant transactions
Access controls – Limit who can access financial systems and sensitive data

2. Create a Fraud Prevention Culture

Essential steps:

• Develop a clear code of ethics and anti-fraud policy
• Provide regular training on fraud awareness
• Establish confidential whistleblower channels
• Lead by example from the top down
• Make it clear that fraud will not be tolerated

From 1 September 2025, the new UK corporate offence of "failure to prevent fraud" comes into force. Large organisations (turnover over £36m, assets over £18m, or 250+ employees) must have reasonable fraud prevention procedures in place or face unlimited fines.

3. Use Professional Accounting Support

Working with experienced accountants like YRF provides:

- Independent review of your financial statements
- Professional oversight of bookkeeping practices
- Expert identification of unusual patterns
- Regular financial health checks
- Guidance on implementing robust controls

4. Stay Vigilant

Monthly actions:

• Review bank reconciliations personally
• Question anything unusual in financial reports
• Monitor key staff behaviour and lifestyle changes
• Check that supplier payments match invoices
• Verify that customer receipts are properly recorded

5. Act Quickly If You Suspect Fraud

If you spot warning signs:

1. Don't delay – Time matters when investigating fraud
2. Gather evidence – Document what you've noticed
3. Get professional help – Contact your accountant immediately
4. Report to authorities – Serious fraud should be reported to Action Fraud
5. Review controls – Work out how it happened and prevent recurrence

The Cost of Ignoring Warning Signs

Research from Trustpair's 2025 UK Fraud Report shows that 93% of UK companies were targeted by fraud in 2024. For businesses that suffered successful attacks, the average loss was £500,000 per incident.

Can your Bolton or Manchester business afford to lose half a million pounds? Most can't. That's why prevention is always better than cure.

How YRF Accountants Protects Bolton & Manchester Businesses

At YRF Accountants, we take fraud prevention seriously. Our comprehensive services include:

• Regular financial reviews to spot unusual patterns early
•  Internal control assessments to identify vulnerabilities
•  Professional bookkeeping oversight with proper checks and balances
•  Staff training on fraud awareness and prevention
•  Compliance support for the new failure to prevent fraud legislation

We've helped dozens of Bolton and Manchester businesses strengthen their defences against fraud.

📧 info@yrfaccountants.com | 📞 01204 938696.