According to the ACCC’s recent Targeting Scams report, Australian businesses lost $227 million to payment redirection scams in 2021. This figure is a significant increase of 77% from fraud losses in 2020.
With this in mind, your company needs to be hyperaware of all financial transactions and actively look to mitigate risk.
While employees or vendors can commit AP fraud, increasing numbers of third parties are looking to gain access to your organisation’s accounts payable system. The most common forms of AP fraud are:
While many hands usually make light work, it also opens you up to more risk. If you have a large Accounts Payable department with many different people managing incoming invoices, you expose the business to increased levels of human error, and higher costs, and provide more opportunities for the dishonest to knowingly take advantage of weak AP practices.
With AP automation, processing supplier invoices is streamlined and hands-off, making falsified payments harder to approve and divert without detection. And, of course, there’s a complete audit trail for every move made.
Committing fraud by submitting duplicate invoices is one of the most common ways to divert payment from the correct recipient to a false one and usually occurs when there are no verification systems in place. In their article on AP fraud, AuditNet quoted the Director of Enterprise Network Security for multinational packaging and labelling company, Avery-Dennison, who estimated that corporations make duplicate payments at the rate of 2%. While 2% may sound like a small margin of error (deliberate or otherwise), if your organisation’s AP invoices total $75 million, then duplicate payments may account for $1.5 million. And suddenly, it’s a pretty big deal.
With AP automation, the system identifies duplicate invoices by automatically checking the invoice header information against already received invoices. And if they duplicate the same information, they are headed off at the pass and flagged for follow-up.
While it’s always a healthy sign that your AP team is busy, it also means that they don’t have time to double-check that the payment account number on the invoice matches the supplier’s account number you have on record.
With AP automation, your system should not only validate that the account numbers match but if a new number is provided, ensure it complies with local bank codes and formats and isn’t sending funds to the cybercrime fraternity – wherever they’re based!
Best practice for most organisations is that apart from recurring or utility bills, supplier invoices detail the purchase order number issued by your company to ensure it’s valid. The problem is, of course, that when busy, time is short to cross reference an invoice without a purchase number against open POs in your finance system. And sadly, employees have been known to collude in passing non-PO invoices for payment for a financial kick-back.
With AP automation, invoices are automatically matched to POs and called out as exceptions (requiring manual reviews and intervention) if they are for a different amount than the original order or have no PO number on them at all.
With AP automation in place, you introduce best practice controls to weed out duplicate or falsified invoices and payments that potentially put your business at risk – without increasing the workload of your AP team or slowing down your ability to process invoices at scale.