According to a 2016 fraud study that analyzed 2,410 cases, businesses lost over $6.3 billion dollars to fraud. While fraud schemes are numerous and changing every day, scammers depend on tried and true methods that have worked well for them in the past. One of the ways that scammers defraud businesses is through invoicing fraud. As businesses grow, and the amount of paperwork grows along with it, many companies are turning to technology to prevent this type of fraud. Accounts payable automation is one area where technology can help. Here are ways AP automation can prevent a business from becoming a fraud statistic.
Reduces Number of Fake Invoices Received
Scammers often attempt to defraud businesses by mailing fake invoices to companies that look legitimate in the hopes that busy accounting departments will overlook it. They may be for smaller amounts for something as innocent as office supplies, which won’t cause AP personnel to be alarmed. In very hectic departments, the chance of this bill getting lost among the paperwork becomes greater.
With the implementation of accounts payable automation, however, submitting these invoices becomes harder. When a business switches to an accounts payable automation system, all legitimate vendors are notified of how invoices should be submitted. A random invoice that appears in the mail or by e-mail will automatically raise a red flag with the AP department, prompting an investigation and preventing possible fraud.
Assists in 3-Way Matching
Established accounting departments rely heavily on the three-way matching process to catch discrepancies. This is not an easy process for AP personnel—especially if you are dealing with invoices in the hundreds or thousands. Packing slips get lost in shipping. Invoices get lost, as well, and sometimes they don’t match the purchase order. Although three-way matching is effective in preventing fraud, it is tedious and leaves room for error during especially busy times, such as the end of the month or year-end.
With AP automation, accounting personnel do not have to match paperwork manually. Invoices that are submitted from vendors electronically are flagged if they don’t match the purchase order. AP automation allows POs to be matched to invoices in real time, as well as matched to receiving paperwork when goods are delivered.
Limits the Number of People Who See the Invoice
A paper invoice may go through many hands before it reaches the AP department—even getting lost on occasion, or sent to the wrong customer. While business owners may not see a reason to be alarmed, after all, they can just request another copy from the vendor, a person that wants to commit fraud sees an opportunity in the system that relies on paper invoices. They can imitate a supplier’s logo, items, and ask for payment to be wired to a different account. Oftentimes, they pose as the vendor’s CEO, in hopes that the accounting personnel won’t question why it’s being sent to a different account number. This scheme alone is reported to cost U.S businesses $215 million dollars in losses.
By using AP automation, however, the chances of this happening are greatly reduced. If a vendor wants to change anything on their invoice, like payment terms, they do so within the system itself. They don’t send a fake invoice in the mail or by e-mail. As a result, scams can be more easily identified. By eliminating the need for paper invoices, it becomes harder for scammers to learn about a business. In addition, AP automation can also implement internal controls as to who can access certain information, which can help prevent internal fraud from occurring, as well.
Protect Your Business
When it comes to fraud, scammers are very creative. While business owners are hard at work growing their businesses, scammers are attempting to take away that hard-earned money. While accounting departments typically have controls in place to prevent such fraud, it can be tedious and overwhelming for AP staff that deal with countless invoices on a daily basis. With AP automation, this burden is eased, and it can help assist businesses with the fraud controls that they already have in place.