AP Automation – Your Key to Reducing Fraud

Blog - 18 Nov 2021

In 2020, 74% of organizations became the target of payment scams and companies lost more than $3.6 billion due to fraud. Knowing that your company isn’t alone may not be exactly comforting, but a simple solution can fix commonly occurring weaknesses. 

Source – Association for Finance Professionals 2021

The transition to fully or partially remote work has further exposed vulnerabilities, with digital communications and payments on the rise. In a survey by the Association for Financial Professionals, 61% of responders admitted that their accounts payable department is the most susceptible to fraud via business email. 

Automation provides a welcome opportunity to achieve efficiency and cost savings while boosting security. Tapping into technology not only provides insulation against fraudulent activity but also drives cost savings across the organization.

Reducing AP processing costs is often a key priority for companies, but what if organizations could tackle the cost element and reducing fraud risk at the same time?

In this article, we’ll examine how AP automation reduces fraud through state-of-the-art features. 

Single Platform for All AP Activity

When departments work in silos, fraud risk increases. A lack of visibility makes it challenging to see red flags in the accounts payable process, for example with invoices for fictitious vendors easily getting lost.

In addition, fraud is more likely to thrive when multiple employees process invoices outside of a secure network. It’s hard to keep track of responsible parties or consistently ensure due diligence before approval. 

For 62% of companies, the primary source for attempted or actual payment fraud is compromised business email, which AP departments are especially vulnerable to.

Automation addresses the issue by having one place to manage all AP activities. Fewer emails flying around means less opportunity for fraudsters to mimic legitimate invoices and other payment information. One system allows preferred vendors to submit invoices and track invoice status while matching and processing invoices.

AP Automation covers every step of the process from:

  • Supplier Management
  • eProcurement
  • Contract Compliance
  • Invoice Data Capture
  • Invoice Matching
  • Invoice Approval
  • Posting and ready for payment

Full visibility on invoice status and real-time reporting protects supplier relationships and enables the detection of fraud to reduce threats. Integration with payment and accounting platforms further increases efficiency and reporting abilities, allowing AP staff to focus on exception handling and other value-adding tasks. 

Reduce Errors

Accurate data entry and invoice matching is a time-consuming but crucial process to detect fraud. However, 51% of companies with manual AP systems struggle with data entry and inefficient processes while 31% consider invoice to payment matching to be a pain point.  

A traditional AP workflow relying on manual data entry is prone to human error, making it more challenging to detect fraud. Manual processes also make it easier for inaccurate account numbers to appear on invoices and ultimately siphon off corporate funds. 

Nearly 60% of companies deploying automation technology saw fewer errors and a 40% reduction in time spent on daily tasks. Companies configure invoice approval workflows with controls to reduce processing delays and increase accuracy. With high levels of automation resulting in a “no-touch” invoice system, AP staff only need to investigate exceptions. Automatic scans for duplicate payments and consolidated payment insights leave less room for fraud to go undetected.  

Heightened Security Features

Automated AP systems support multi-factor authentication to protect against account takeovers. Adding another layer of security reduces accidental or fraudulent payments. You can limit access to invoices and appoint the authorizer, approver, and manager. 

Better tracking of who makes invoice or documentation changes also leaves a transparent audit trail. With controls in place, automation reduces unauthorized access to payment systems and prevents employee fraud.

Removing unnecessary human intervention reduces opportunities to manipulate information and cause invoice fraud. Three-way matching between the invoice, purchase order, and delivery receipt (GRN) supports straight-through processing that achieves enhanced security along the way. 

Manage Supplier Contracts 

Best practices in supplier management involve supplier performance evaluation. But periodic reviews of existing contracts are equally important. Companies lose as much as as 9% of their annual revenue due to poor contract development and management. 

Auto-renewing contracts without evaluation or renegotiation can leave the door open for fraud. For example, recurring payments to a suspicious account could go unnoticed without regular contract reviews. Value leakage due to fraudulent or inaccurate billing practices comes with financial consequences, but it could also affect supplier relations. 

Automation solves the problem by integrating procure-to-pay systems with systems to manage existing vendor contracts. Managing contracts in one place allows managers to effectively monitor contracts and receive alerts when it’s time for periodic reviews.

Consistent Application of Internal Controls

According to the Association of Certified Fraud Examiners, a lack of internal controls contributes to about a third of all fraud cases. Anti-fraud controls decrease losses and allow for faster detection of fraud cases. It’s important to apply controls consistently to every transaction through a customizable e-procurement process and data validation.

With AP automation, requests for operational spending go through a simple but efficient process. The system checks for duplicate payments and duplicate invoices and validates information against a list of approved suppliers and authorized limits.  

Since the company’s procurement policy is built into the system, only payment in compliance with corporate policy would be approved automatically. 

Exceptions and irregularities will require manual review, strengthening controls against fraudulent activity without slowing down the approval process.

Address Fraud Risks, Automate Your AP 

Traditional methods of handling payable information can’t keep up with the rapid-fire demands and high-volume transactions of organizations. Aligning procurement with accounts payable on one single source of truth minimizes errors and improves error rates as well as controls.  

Accounts payable automation promotes cost control, efficiency, and accuracy. Tap into modern enterprise solutions to combat fraud with SoftCoAP.

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Posted by

Robert Lynch

P2P Insights Analyst

Posted by

Robert Lynch

P2P Insights Analyst