How AP Automation Solutions Help Reduce Tax, Fraud & Regulatory Risks

  • 06 Sep 2018
  • Best Practice & Strategies
How AP Automation Solutions Help Reduce Tax, Fraud & Regulatory Risks Image

As the digital transformation continues in business and finance, accounts payable teams and procurement leave the back office for a more strategic approach. AP automation solutions make a significant difference in the AP department’s efficiency and risk reduction programs. Solutions are customized and implemented to facilitate early payments, reduce tax fraud, and eliminate regulatory risks. The C-suite also gains access to crucial data in real-time to help them refine procedures to ensure AP tax compliance and minimize losses.

Keeping Up With Tax and Regulatory Changes

Ongoing tax changes are a critical issue for accounts payable and the finance team. The most recent corporate tax code changes had a notable impact on strategic planning for both the procurement and finance departments. Increased rates require adjustments. Further changes this year include lower deductibility of interest expenses. Companies that carried massive debt updated their capital structures.

On the side of regulation, compliance has become more critical than ever. The refinement and enforcement of rules ensure companies follow them to the letter. Failure to comply with regulations can lead to fines and even threaten the reputation of an organization. Having updated information about suppliers and tax rates is crucial. An AP automation solution eliminates the need to update every account manually. Changes can be done automatically in a fraction of the usual time. And the AP team has more time to focus on strategic tasks, such as explaining the ramifications of regulatory changes to the C-suite.

Integration to Avoid Errors

The integration of AP automation solutions promotes risk reduction. The ultimate goals are to eliminate errors and handle all routine functions automatically. AP automation can be a touchless process that decreases the time required to accurately perform typical tasks such as reviewing supplier data, approving invoices, and PO matching. A modern AP automation system detects irregularities to avoid tax, fraud, and regulatory AP risks. It also makes international commerce more transparent with updates and data in real-time. Manually calculating international differences is time-consuming, labor-intensive, and opens doors for errors and fraud.

Also, digital technology collects relevant supplier documentation required for corporate compliance, such as a W-8 form. Supplier documentation and information can be verified and updated to facilitate strategic transformations within the AP department seamlessly. Purchase-to-pay technology helps companies obtain the AP benefits they seek to see an ROI on implementing a digital system. Reducing fraud, complying with the latest industry regulations, and making payments to suppliers in less time enables the C-suite to carry out smarter cash management tactics.

Easy On-boarding and Standardization

On-boarding becomes a difficult job for the AP department handling it manually or with an ERP system. When dealing with thousands of suppliers, on-boarding and payment become a monumental project each month. Accuracy is crucial to ensure compliance. Establishing an airtight system makes it harder, or impossible, for fraud to occur. Duplicate accounts, double payments, overpayments, missed payments, and other irregularities force alerts. AP automation solutions also facilitate standardization and clear communication. Data is accessible anytime, and from any location, so everyone knows all accounts’ current financial status. Standardizing through automation ensures accurate information for suppliers, enables early payments to realize savings, and makes all transactions transparent. Nothing is left to chance, closing another door to potential fraud.

The Benefits of Daily Monitoring

The 2016 Association of Certified Financial Examiners (ACFE) Report to the Nations on Occupational Fraud and Abuse revealed organizations with no anti-fraud control suffer nearly twice as many losses as those with controls in place. In 7.5 percent of asset misappropriation that results in fines, organizations face penalties for having inadequate controls that make it possible for fraud to occur. These facts make a solid case for implementing AP automation solutions that provide daily monitoring to reduce tax, fraud, and regulatory risk.

Absent modern controls, the detection of fraud schemes takes an average of 18 months to discover. The longer fraud continues, the greater the financial losses to the organization. AP automation helps screen for risk factors and warning signs to detect fraud faster and minimize potential losses. Limited and random audits do not deter fraud because it is easy for scammers to circumvent announced audits. And external audits might not specifically target fraud or prevent losses. Daily monitoring is the most effective way to detect and combat fraud. Invoice issues, employee-vendor matches, and other unusual situations are uncovered right away to stop fraud in its tracks and end financial losses.

Three Key Benefits of AP Automation Solutions

AP automation provides accountability and transparency. Details of every transaction can be found quickly to combat fraud and protect the integrity of operations. AP automation solutions offer three key benefits to enhance compliance and minimize fraud occurrences. First, an automated system makes it simple to file and recall relevant documentation for audits. Accessibility makes it easy to find unusual activities, who executed them, when they occurred, and determine if they resulted from an error or a calculated attempt to get away with fraud.

Secondly, AP automation solutions provide controlled access to the latest data. Specific responsibilities go to designated AP team members. Segregation of tasks helps improve accuracy, find discrepancies, and ensure compliance while guarding against internal fraud during crossovers. It is impossible to overlook approvals and differences with this system of checks and balances.

Finally, AP automation enables an organization to establish a set of best practices to improve workflow and set up specific steps, such as multiple approvals for payments. Rules are inputted into the system, so they cannot be by-passed.

 

AP automation solutions encourage risk reduction. From detecting fake vendor accounts to establishing a protocol for the AP department, automation makes it possible for companies to significantly reduce or eliminate tax, fraud, and regulatory risk. The AP team becomes a strategic part of the organization to help cut costs and encourage transparency in all financial dealings.

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