The pandemic crisis or other natural disasters create a complex work environment, and the fraudsters tend to seize this opportunity to capitalize on gaps. Significantly, the accounts payable department that accounts for all financial transactions of the organization is the primary target for most fraudsters. A system of checks is crucial for early detection and prevention of fraud. This helps businesses reduce losses and allows them to protect their reputation.
Industry experts say that most companies are losing more than 5 percent of their revenue to fraud committed by their employees. The recent changes in procedures due to COVID-19 open the doors for additional fraud in AP processes. Businesses must examine the accounts payable processes during times of cyber infiltration to detect and fend off the fraud schemes. But, watching for fraud schemes at all times in the AP processes with the traditional approach is challenging. So, the companies need to have advanced systems that provide accurate financial data and help combat potential fraud.
Having accounts payable automation and streamlined processes provides the unified system and makes it easier for AP teams to detect and eliminate potential fraud in the AP department. Below we have listed a few ways to detect AP fraud and also explained how AP software helps to reduce these fraud schemes.
How Accounts Payable Fraud Happens
Accounts payable fraud can be conducted by employees or third parties involved in the AP process. For instance, employees can hide fraudulent financial transactions among legitimate ones, and suppliers may establish fake accounts to funnel money into their accounts, or the round number payments and duplicate payments in very small or large payments. Often the employees who are typically in a high position of authority or middle management position commit fraud activities whereas the happy employees are less likely to commit frauds.
International Issues During Pandemic Crisis
Due to the global crisis, most companies struggle to find ways to make their employees work remotely. With this uncertainty, many international cybercriminals are looking to capitalize on this pandemic crisis. During the quarantining, most employees work from their homes that might not be adequately tested or fully equipped with secure technology. So, there are high chances for malware, phishing, and unauthorized access.
Stressed and overworked employees can cause vulnerabilities and hackers try to exploit them. While the IT teams are concerned about creating remote work environments, hackers may try to find new ways to infiltrate networks to manipulate sensitive data. Fortunately, the accounts payable software provides a secure work environment for the employees that enables them to work anywhere and anytime in real-time. The software helps to fight against various frauds, including tax and regulatory scams during these hectic days.
The Scammers Come Out During Coronavirus
AP experts predict that a variety of scammers, including the malware distributors and email phishers, are trying to attack businesses. For example, cybercriminals distribute emails with a link or attachment that causes malware to infect the system when clicked or opened. Some hackers also send emails to get the recipient to enter their login credentials using which hackers can harvest private data. Amidst the COVID-19 pandemic, most scammed emails pose as legitimate health care companies providing valuable information about the disease. So, the management needs to identify scammed emails that can infect the company’s system and affect the reputation and productivity of the organization. With most of the employees working from their homes, businesses are more concerned about the privacy, security, accountability, and actions of the employees.
The B2B Payments Survey reported that more than 40 percent of the organizations had faced B2B payment fraud attacks last year, among which 20 percent of the companies experienced a loss. The survey also reported that around AP fraud accounts for 50 percent of B2B payment fraud.
Achieving Optimum Security in Accounts Payable
Beyond automating processes, AP software is viewed as an important way to combat fraud. The AP automation provides transparency into the operations, allowing AP staff to access the updated data anytime securely. As the financial transactions data is visible, there are very few chances for fraud. Advanced AP solutions combat various types of frauds in the process, including
- Fake suppliers who hope a specific employee approves invoice payments before detection. The rule-based workflow ensures that no invoice payments are processed before vendor verification.
- The AP software automatically detects and eliminates duplicate invoices sent by different entities that may result in duplicate payments.
- Electronic payments eliminate the check frauds where the fraudsters steal paper checks and use a fake ID to clear it.
- CFO fraud may occur when a fake email containing the conversation between CEO and CFO about acquisitions, including the financial details, is sent to the finance team. The automation establishes a standardized payment approval process, which means no invoice payments are made based on fake emails.
- Inside AP fraud occurs when a vendor works with a specific AP employee to clear fraudulent invoices with both agreeing to disappear before the fraud is caught. With the rule-based supplier verification, the delegation of authority, and a real-time audit trail, the automation process deters this activity in the initial phases itself.
- The AP software provides a complete audit trail to the management to help them shed light on the dark actions.
Detecting fraud in the early phases helps businesses to protect their reputation and clients. The scams, such as Enron, have been warning businesses to watch out internal and external operations, especially during the pandemic times to eliminate fraud acts. However, the automated AP solution provides transparency and helps to catch fraud before it incurs significant losses.
Taking It to the Cloud
Businesses consist of crucial information that should be secured against unauthorized access and fraud. But, maintaining privacy during the pandemic times when employees are working remotely is difficult. The AP software establishes and maintains the highest levels of security to ensure the protection of sensitive financial data by focusing on website security, facility security, employees and operations, email security, mobile device security, and more. Plus, cloud-based automation provides a secure work environment where employees work in real-time from anywhere. With this approach, all levels of security can be quickly addressed when employees return to work in an office.
Most of the companies that are operating with the cloud-based AP software can support the employee who is working from remote locations. The cloud-based work environment ensures that every employee travelling for business purposes can stay in touch with the financial data remotely. Keeping an eye on the pulse of AP data makes it easy for businesses to detect and prevent fraud. Even the start-ups are discovering benefits they will get with cloud automation, especially in the AP departments.
Follow a Protocol
The manual accounts payable processes are tedious and time-consuming, leaving plenty of room for fraud and errors. Only a few employees working in the higher levels of the organizations can access crucial data, which means they can adjust or change the data whenever required to avoid detection. But the accounting software follows a specific protocol defined by the organization. This customized system ensures all steps are taken care of to verify suppliers, legitimate transactions, and approve payments. It is always better to clearly define which employee is authorized to spend the money and who must authorize invoice payments. AP automation allows the designated approvers to access the data in real-time remotely and approve payments quickly.
Establish a Secure System
Management should establish advanced security features in the system to make it difficult for the fraudsters to commit fraud. Vet the suppliers to ensure that they have legitimate contact information, including phone numbers and office and permanent address. Check the frequent payments to specific suppliers at odd hours and faraway transactions that take place outside the organization. The robust accounts payable software allows you to set up a secure platform where most of the processes are automated.
Every dollar spent on the organization should go through the accounts payable department, making this space lucrative sport fraudsters. As there are more money and crucial financial data, there is a high potential for fraud in accounting. These frauds are an inevitable part of doing business. Be it a start-up or a Fortune 500 company; there are possibilities for internal and external fraud when vendors and third-party suppliers are considered. So, businesses should monitor the process to detect frauds, including fraudulent expense reimbursement claims, false billing, tampering, and more.
AP software centralizes all the crucial data and provides the highest level of accountability by allowing the SutiAP team to securely access data from anywhere and makes everyone accountable. The software makes the processes transparent and allows the accounting team to verify the data. So, the employees know where the money is spent in real-time, which means frauds can be easily detected and eliminated to avoid significant losses. The software plays a crucial role in identifying, stopping, and preventing fraud schemes and helps organizations to protect reputation and boose productivity.