Business fraud, be it fraud against a business or internal business fraud is on the increase, as is the level of complexity and frequency of occurrences.
Accounts payable is the area most vulnerable to fraud in almost any organisation. It is responsible for invoice approvals, supplier legitimacy and correct payments and – while most companies have diligent AP staff who act in the company’s best interests – there is plenty of potential risk and significant opportunity for swindlers.
This pressure compounds when you are dealing with thousands of invoices month after month, not to mention poor controls that rely heavily on individual honesty.
The consequences of accounts payable fraud are far-reaching, for both the organisation and the individual if caught.
How do we reduce the risk of accounts payable fraud?
The key is to implement strong internal controls and adherence to business rules. The best ways to do this is to automate as much of the accounts payable and procure-to-pay process as possible.
How does accounts payable automation and procure-to-pay help prevent fraud?
Automated solutions ensure the same controls are consistently applied to every invoice. Automation enforces adherence to business rules, reducing the opportunity to commit fraud.
It also frees up accounts payable staff to investigate suspicious or unusual transactions.
For example I often ask AP staff, “Do you investigate if a company is registered to receive the tax you are paying them?”.
Almost without exception the answer is no, despite the fact that this responsibility lies with the company to ensure the tax being claimed on the invoice is actually payable. In Australia, GST fraud is one of the most common forms of fraud.
Similarly, when asked if the payment details on the invoice are checked against what is on file, AP staff will usually say “occasionally”. When asked how often the company compares vendor bank details to look for discrepancies, the response is “every couple of years”.
Checking the invoice payment details (BSB and account number) against the vendor master profile ensure the correct organisation or person is paid.
Automated AP solutions also handle duplicate payments, which subsequently reduces the likelihood of fraud. It can help to prevent one payment being paid to the person committing the fraud and the other to the supplier.
Cases of fraudulent action can reportedly continue for two years, on average, before being detected. Often, they can be prevented through simple checks however lack of time and inconsistent application of proper processes create loopholes that allow fraudulent activity to thrive.
How to implement accounts payable internal controls through automation?
The most effective and appropriate automated accounts payable solutions will be based on business rules and internal controls unique to the size and nature of an organisation. This is why Acumen Data’s Complete Automated Accounts Payable Solution is tailored to an organisation’s specific needs.
While fraud cannot be eliminated, implementing an automated accounts payable solution can significantly reduce the risks of error and the opportunity to rip off a company.
More questions? Feel free to email Richard at richard.bates@acumendata.com
