Best practices to protect yourself against fraud leveraging AP automation
- 29 Aug 2019
- AP Automation
Fraud costs companies significantly, eating into profits and impacting the reputation of the business. Detecting opportunities for fraud and being proactive about preventing them helps companies maintain a trustworthy brand and a healthy bottom line. Smart companies are leveraging AP automation to guard against acts of fraud. Automated invoice processing helps close the door to theft while improving overall operations.
Detecting invoice fraud
Also known as business email compromise, it is crucial to learn ways to detect and avoid invoice fraud. As processes change, so do the strategies to combat fraud. And, large companies are facing this challenge. For example, Google and Facebook got duped out of $123 million by a scam that costs businesses billions every year. Consider the billing fraud against the Swedish government that is estimated to be an astounding 88 million Swedish kronor.
Compliance is a key factor in detecting and ending invoice fraud. According to a Lloyds Bank survey, 52 percent of the respondents faced invoice fraud. Despite this fact, just 20 percent reviewed their invoices, and 37 percent had no process to prevent invoice fraud. Companies leveraging the power of AP automation are not facing these costly and time-consuming challenges associated with the fraud.
Get the facts on check fraud
Nobody wants to get a fake check or uncleared funds. Bad checks add up to serious fees and balance questions. In 2016, 75 percent of organizations experienced check fraud. This is an increase from 71 percent in 2015. For a short period, the problem seemed to decline after 2010. But this age-old opportunity has been a common problem for generations, especially for United States companies and individual Americans.
Overall, check fraud accounts for 32 percent of industry losses. And, fraud against bank accounts cost around $2.2 billion in 2016. AP automation should be adopted sooner rather than later to guard against these potential losses. With cloud AP automation solutions, everyone on the AP team and C-suite can get updates in real-time, making it easier to detect issues before they become massive problems.
Combating corruption and billing schemes
The most common fraud scheme is corruption, which is followed by billing schemes. Internal processes must be watched closely to prevent losses. History has proven time and again how these two schemes are used to steal from corporations. Consider the Enron scandal of 2001 where the big guys kept big debts off the balance sheet. Or the Lehman brother who hid $50 billion in loans in 2008.
Having a finger on the pulse of accounting, AP, and vendor activities is crucial to close the door to possible acts of fraud. With that in mind, AP automation is no longer a luxury but a necessity. Failure to keep up with the latest technologies means being left behind - and remaining vulnerable to acts of fraud that can lead to severe losses and even force the doors of business to close.
Common stumbling blocks to compliance
The AP department faces off with common stumbling blocks to compliance, and some leave the doors open to possible fraud. Exceptions continue to be the bane of the AP department’s existence. The leading cause of invoice exceptions is a discrepancy between the purchase order (PO) and the information provided on an invoice. Another top cause of invoice exceptions is supplier error.
AP automation solutions help ensure the highest level of compliance. Better compliance with regulatory requirements is one of the leading reasons corporations are rushing to adopt AP automation to push past these typical stumbling blocks.
Use automation to follow the trail
Robust AP automation solutions make it easy to follow the lifecycle of a vendor record or invoice with detailed data and time updates. The AP team and the C-suite can watch to detect and deter fraudulent activities by looking for:
- Invoices that are missing essential information, such as description and quantity.
- The vendor info contains PO boxes or public email addresses rather than corporate ones
- Drastic updates to the usual vendor prices
- Approved amounts just a small amount lower than the approval limits
- Rounded invoice values such as $100 rather than $98.97
- A notable increase in invoice volume for a specific supplier
- Logging in after-hours with modifications to invoices and vendor data
With AP automation solutions, automatic reports can be delivered to an oversight committee or role, to constantly check for fraudulent invoices or payments and stop wrongful actions immediately.
Accessibility to data in real-time
Cloud AP automation provides ongoing access to data in real-time to keep track of activities without missing a beat. And, access can be controlled to reduce the possibility of fraud from activities such as rerouting by:
- Preventing approvers from modifying or changing the invoice data
- Not permitting approvers to pay the invoices
- Limiting access for editing vendor data and records
- Not permitting approvers to modify user permissions.
- Reporting for management to track spend and activity by employees or vendors over a specific time
Track and enforce AP workflow
Tracking AP workflows and following established rules and protocols reduces the possibility of fraud by preventing bypassing and other activities that could leave the door open to problems. Track, enforce, and simplify AP workflow by using AP automation to establish:
- Multistep approvals
- Individual approval thresholds
- Exception handling workflow
- Automatic invoice routing
- Digital PO matching
- Approval limits requiring 2-step authorization for large payments or spend in unauthorized categories
Fraud is not going away anytime soon, but you can prevent it. Leverage yourself against it by using AP automation solutions to stay on top of everything as it happens. Knowledge is power, and technology is its greatest ally when it comes to corporate fraud prevention