Payment fraud has reached alarmingly high levels over the past few years.
During a poll of nearly 700 finance and treasury professionals earlier this year, the Association for Financial Professionals discovered that 78% of those polled had been hit with accounts payable fraud in 2017.
The Association of Certified Fraud Examiners (ACFE) found that, in 2016, that the median loss per business due to fraud was $150,000.00. Those numbers are only likely to climb unless businesses start taking steps to protect themselves.
Most instances of payment fraud occur in the form of a bad check, but there are many other ways to scam a business. Sending fake invoices is another common one. That’s on top of all the revenue already lost through unintentional bookkeeping errors, or thanks to poor and outdated bookkeeping methods.
One example of accounts payable fraud can be found in a recent probe into an invoice paid by ACT Public Housing Taskforce in Australia. When accounts payable issued a legitimate payment to a contractor, it was later discovered that the account information had been deliberately falsified, and the payment was deposited into an illegitimate account operated by “illegitimate parties,” instead of the intended (and totally legitimate) recipient. During the ensuing year-long probe, it was determined that the staff in accounts payable never verified the contractor’s account details before making the payment.
In response, the housing taskforce conducted a thorough internal review of their management of accounts payable functions, as well as of the procedures in place to detect and prevent fraud. According to their spokesperson, the “review recommended strengthening controls to verify requests for changes to supplier bank account details,” and the money was eventually recovered and sent to the right recipients. The culprits, on the other hand, were never identified.
It’s clear that payment fraud has become a huge problem. Treasury and finance professionals need to remain not only hyper-vigilant in order to protect themselves, but also need to be prepared to anticipate scams and deter potential attacks. Planning, implementation of proper processes, and a bit of accountability can go a long way in identifying and preventing fraud before it occurs.
What can be done? For starters, it’s a good idea to create audit trails, so every payment, invoice and check your company sees can be tracked and located at any time down the line. Monitor requests for duplicate payments, too; duplicate invoices happen a lot more than you think. Make sure your staff has clear job descriptions and division of duties, so everyone knows exactly who oversees what, and make sure that no employee has more authority than is necessary for them to complete their own role.
Taking a proactive approach against fraud and duplicate payments will pay off, too. Building good process integration between Procurement and Account Payable will help ensure that goods and services are ordered according to purchasing policy and are received properly before the invoice is paid. And if you’re not afraid of little analytics, start using data to find trends in supplier invoices. Data-rich organizations can keep tabs on overpayment to suppliers by finding trends in both supplier performance and supplier spend and can help you set your own parameters for tracking and identifying potentially fraudulent invoices. Have any potentially fraudulent invoices sent to the right person for review.
Finally, one of the best things you can do to protect your businesses against fraud is make the switch to a digitized records management and payable automation system. Invoices and other documents are constantly coming in from different directions and in a variety of formats and keeping track of it all can be difficult. A digital system can capture and sort those documents, delivering them to the right people for review and payment. Invoices and payments will also be eminently more trackable should problems arise.
Larry Bennett, Sr. is the CEO of AccuImage, a 30-year leader in document and information management services based in Santa Clara. Their document processing and information management systems have been used by some of the world’s biggest brands in a variety of industries, including companies such as Nestle, PG&E and NVIDIA.
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