October 11, 2019
Fraud can have a detrimental impact on an organization’s finances, operations, and reputation—and it doesn’t discriminate against company size or type. According to the Association of Certified Fraud Examiners, in 2018, there were more than $7 billion in losses due to fraud worldwide.1 When fraud happens, it commonly occurs within Accounts Payable functions, as payments that are regularly sent out to vendors can be manipulated or tampered with. Payments fraud has been on the rise in recent years. According to research done by the Association of Financial Professionals (AFP), 82% of financial professionals in North America reported that their organizations experienced attempted or successful payments fraud in 2018; this is a 20% increase from 2014.2
1 2018, ACFE Report to the Nations: Global Study on Occupational Fraud and Abuse
2 2019, Results from the 2019 AFP Payments Fraud & Control Survey
There are several common types of AP fraud—both external and internal:
One reason AP fraud occurs so frequently can be attributed to the rise of international business and global supplier payments, especially within the last decade. Globalization affects even mid-market and smaller organizations as international markets are becoming more accessible to businesses of all sizes. Another common cause of fraud is a heavy reliance on manual AP methods, including check payments and paper approval routing. With manual processes, it is easier to tamper with records, forge check endorsements, and fabricate approvals. Also, despite the belief that paper trails are foolproof, especially when it comes to audits and investigations, fraud occurring amidst manual operations is not easily detected. Unfortunately, the use of manual payment methods is still a favored option for many organizations (see Figure 1).
Which of the following payment methods does your organization currently use?
Organizations need to improve visibility and tighten their grip on risk prevention across the entire AP process.
Organizations—particularly those in the mid-market with more vendors than a small and medium-sized enterprise (SME) but not as many controls in place as an enterprise—need to improve visibility and tighten their grip on risk prevention across the entire AP process. When AP is operating manually or an organization lacks fraud prevention measures, there are many process and control gaps in which fraud can take place. One of the top payments-related pain points is duplicate invoices and/or payments, followed by many others that pertain to fraud and risk management, including reliance on paper-based processes and invoice to payment matching (see Figure 2).
Still thinking about your organization’s current payment solution and/or process, which of the following describes your organization’s top payment issues or challenges?
When invoices and payments processing is paper-based, they are highly difficult to track and it is much more common that someone pays a fraudulent invoice, whether unknowingly or intentionally. Lack of visibility into payment activity can also lead to more frequent duplicate payments or higher chances of check or ACH fraud.
Once organizations adopt an AP automation solution, they greatly improve their risk management capabilities.
Once organizations adopt an AP automation solution, they greatly improve their risk management capabilities through improved visibility, tracking, and controlling invoice and payment processes. Increased visibility leads to benefits like fewer duplicate payments and lower risk of check/ACH fraud, as well as more efficiency for employees and lower costs to the business overall.
Organizations can take the following steps to improve their AP’s risk management and avoid fraud:
Adding transparency and tighter control throughout the financial process will strengthen organizations against risk and loss.
There are advanced solutions available for organizations that are looking to improve their management of risk and fraud prevention through the steps listed above. With globalization and technology transforming markets, supply chains, and business operations, AP departments should think proactively about risk and fraud management, as well as more strategically overall. Adding transparency and tighter control throughout the financial process will strengthen organizations against risk and loss, and prepare them for an increasingly diverse and digital business world.
Beanworks automates accounting workflow to empower teams to succeed. From purchase to payment, Beanworks integrates with organizations’ software to make AP simple and delightful. Thousands of users manage AP at a fraction of traditional processing costs while remaining focused on financial management and reporting. For more information on how to save time and focus on what matters most, please visit www.beanworks.com.
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Jamie Kim is a Research Content Specialist for Levvel Research based in New York City. She develops and writes research-based content, including data-driven reports, whitepapers, and case studies, as well as market insights within various digital transformation spaces. Jamie’s research focus is on business automation processes, including Procure-to-Pay, as well as DevOps, design practices, and cloud platforms. In addition to her research skills and content creation, Jamie has expertise in design and front-end development. She came to Levvel with a research and technical writing background at an IT consulting company focused on upcoming AI and machine learning technologies, as well as academic book editorial experience at Oxford University Press working on its music list.
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