Five ways businesses are being defrauded and how AP automation software can help stop it
Increasing fraudulent activity
Occupational fraud is nothing new, but it has increased at an unprecedented scale in the last two years due to Covid-19.
The Association of Certified Fraud Examiners (ACFE) reported to the Nation on Occupational Fraud and Abuse that 41.8% of fraud takes place in private businesses. Since only 12% of fraudulent activity is committed by prior offenders, the majority of fraudulent offences are carried out by seemingly honest employees. This stark fact sadly shows no sign of slowing down, with payment and invoice fraud at particular risk of increasing in the next 12 months.
In this article, learn about the five ways businesses are susceptible to defraud and how AP automation software can provide the solution.
1. Scrutinize the small print to root out vendor fraud
The payment paradigms matter. Neglecting the small print in fast-pace and large-scale organisations is what fraudsters desire to funnel company money into their personal accounts and as a result, millions are embezzled via vendor fraud because most businesses are oblivious to it.
To combat this, companies must vet their vendors. Start with vendor enrollment and verify mailing addresses, contact numbers, vendor tax identification numbers, points of contact, and bank accounts. Onboarding a vendor as part of your organisation is the first crucial step in identifying vendor fraud.
After you’ve secured your vendors, continue to prioritise the fine print. Build ongoing data analysis via AP automation software into your business models to help identify unauthorised payments to unrecognisable accounts, transactions at odd hours of the day, and faraway transactions to unfamiliar countries.
2. Keep a lookout for irregularities in payments
Knowing where to look is half the problem. The average fraudster holds a senior position and has been employed by the company for at least five years. Therefore, they know how to slip illegal transactions among legitimate ones, which makes invoice fraud detection that much more challenging. Watch out for payments that have been rounded up, duplicate transactions, and very small or very large payment requests. These are all red flags.
AP automation software is a useful scouting tool. With automation, systems can be customised to keep track of verified transactions. Companies can use these tools to clearly define who controls the purse strings and who authorises payments. This makes transactions more transparent, accessible, and verifiable, which will make it easier for businesses to monitor fraudulent patterns.
3. Choose digital over the physical to eliminate cheque fraud
According to research from NatWest, fraud costs UK businesses £190 million annually, and 40% of that figure is stolen by staff. Whilst most fraudulent activity is conducted online, companies must be aware that physical cheque-grabs still occur in-transit, as not all businesses have upgraded to a more digitised system. Other methods of cheque fraud include using counterfeit, non-bank issued cheques and forgery.
To eliminate this risk, businesses should opt for digital software. Automated AP enables a highly securitised payments process which prevents fraudsters from manually changing any aspect of invoice data – thus eliminating the risk of paper steals.
4. AP Automation software increases compliance and decreases invoice fraud
Fraudsters need poor compliance procedures to succeed in their illicit behaviour. They tend to intercept email exchanges, or compromise an email account - all of which is made possible with decentralised invoicing.
AP Automation solidifies the compliance process, creating a singular channel in which payments are handled, therefore making it harder for fraudsters to tamper with and redirect payment details into their personal accounts.
5. Cloud AP Automation software is a game changer against fraud
The increasingly digitised world of work means that fraudulent activity also becomes more digitised. Unfortunately, limited time, resources and hybrid working mean that businesses cannot oversee every payment transaction, which provides the very opportunity fraudsters need to infiltrate networks and exploit private data.
Cloud AP Automation software helps to tackle this very problem. It provides a visible and secure environment which users can employ from any location, at any time, as well as a timely and frequent communication channel. This system is based on centrality, transparency, and visibility and allows users to flag irregular transactions as soon as they see them.
Medius accounts payable software allows finance teams to work in an environment where frequent and real-time data, irregular paradigms and attention to detail can all work together to reduce the risk of defrauding businesses.
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