Dealers need to proactively combat fraud

Since the recession hit, fraud is up -- and dealers should beware, dealership accountant John Davis warns. Employee embezzlement makes up nearly half of fraud cases, said Davis, of accounting firm Dixon Hughes PLLC's Atlanta office. The median loss for private companies approaches $230,000.

Some of the schemes Davis talks about aren't surprising -- kickbacks from vendors, checks paid to fictitious vendors, personal credit card charges run through the dealership. Others are more creative -- setting up "ghost" employees in order to collect paychecks or manipulating the amount of withholding shown on payroll records to claim an extra big refund at tax time.

Davis urges dealers to do more to prevent opportunities or to crack down on cheats early.

Limit the people at your dealership who can access money. Pass out payroll slips yourself (not only a goodwill gesture, but you'll verify that everyone you're paying exists). Set up a tip hotline that employees or outsiders can use to report suspicions (almost half of fraud cases are detected through tips).

Above all, set a tone at the top by making sure employees know you're inspecting bank statements and other account paperwork and staying on top of vendor relations.

"Controls, controls, controls -- that is the key," Davis says.