Businesses grow in stages, and often that growth is linear. Year-to-year profits expand incrementally as new products are developed and new services offered. Sometimes, however, a company will want to seize new opportunities and expand rapidly. Perhaps a competitor drops from the market and your firm is suddenly faced with a new client base. Perhaps an improving economy makes opening new stores in another region a viable option. Perhaps a vendor that supplies one of your company's key components has started searching for a buyer.

For many companies, inventory is a significant dollar amount on the company's financial statements. So it's crucial that recorded inventory balances reflect actual values. When such accounts aren't properly stated, the cost of goods sold and current ratios — numbers that often matter to decision makers — may be skewed. If banks discover that your company's inventory accounts are overstated, they may not extend credit. If, when necessary, inventories aren't "written down" (their values lowered in the accounting records), fraud may go undetected or the company's net profits may appear unrealistically rosy.

Vendor fraud is like a leaky water main. Little by little it drains your company's resources, but is often hard to detect. One survey found that U.S. businesses lose $65 billion annually to fraud, or about 5% of their revenues. And much of that fraud is committed by company suppliers, with or without the help of insiders.