We all know that fraud is a big problem in the UK for businesses, one that’s been estimated to cost organisations up to £193bn per year. One of the most vulnerable areas within a business to conduct illegal activity is accounts payable (AP). It’s worrying just how easy it can be to conduct fraudulent activity in this way such as the recent case of Dublin Zoo who fell victim to the tune of a reported €500,000 when a cyber scam intercepted account details on an invoice and sent new ones.
Safeguarding and protecting accounts payable can seem increasingly overwhelming as invoice, account and client data are all in need of protection and cyber scams seem to be growing in frequency and sophistication. However, putting in controls and systems to protect a company is more important than ever.
According to the 2016 PwC Global Economics Survey, some 55% of UK organisations have reported cases of internal fraud, a figure that is significantly higher than in the US (38%) and China (28%). The report revealed that 60% of economic crime in the UK was committed by external perpetrators, with crime carried out by employees accounting for 31%.
Perhaps the most surprising fact to emerge was that the number of “silver fraudsters” is higher than ever before, with crimes carried out by senior management more than doubling, from 7% to 18%. In addition, the survey found that 45% of internal fraud was carried out by employees who had worked for five years or more with their company and 21% for over a decade.
One way in which it can be protected is using cloud technology that provides automation to AP as well as extra security barriers that can help prevent fraud attempts. However, many accounting departments are reluctant to embrace a digital system as it seems to take the control away. Yet, as I will explain here the controls put in place by AP automation have a significant impact on protecting data from fraudulent activity.
Anti-fraud benefits of AP automation
AP automation offers the greatest level of transparency and accountability because every payment that is made must go through the system. The result is that, no matter what issues might arise, details of each transaction can be found quickly and easily and for this reason, it is a key part of internal fraud prevention.
An automated system offers three key benefits that help the fight against fraud and, as a consequence, keeps a business and its clients’ transactions safe.
Audit trails made easy
Traditionally AP processes incorporated thousands of paper documents all filed within a complex cross-referenced system which led to documents being lost or misfiled and presented opportunities for fraud. With an automated system, the filing of all relevant documents is made simple but, more importantly, so is recalling the complete lifecycle of an invoice or receipt. This makes it easier to identify any unusual activities, who executed a particular action, exactly when and verify if it was due to an honest mistake or something more sinister.
In addition, automated services identify important missing invoice details (description, quantity etc.), Notes vendor price changes, tracks unexpected increases in invoice volume and flags after-hours logins and modifications to invoices.
Control access
AP departments have never been open shops – access has always had to be controlled. The same access control can be provided through AP automation, but because of the advanced security features now synonymous with the Cloud, access can be even more effectively policed. This is because electronic invoicing systems can assign specific responsibilities to specific team members, restricting set functions to only a few and avoid activity such as unauthorised invoice modifying.
This systematic segregation of each AP task can also result in greater compliance and accuracy, and with no crossovers permitted, offers a highly effective guard against internal fraud.
Set workflow practices
Efficiency is crucial in a successful AP department, but it’s often difficult to achieve. The key culprit was always the volume of paperwork to be processed, and pressure to meet targets in time for the fortnightly report. To deal with both, approvals were sometimes made just to push payments through.
Even in the most efficiently run departments, the task of checking each invoice before paying it was a big ask, making the likelihood of missing a discrepancy quite high. With that fact known, employees were more likely to be tempted by fraud.
An automated AP solution allows a company to set its own set of best practices, not only improving workflow but establishing step-by-step measures that must be adhered to. These can include payments requiring multiple approvers before being paid, or the introduction of a mandatory pre-approval review process. And because all rules and processing policies can be inputted, the system will automatically apply them preventing anyone from by-passing them.
So, if you want to get serious about mitigating fraud in AP looking at automated options may be the first step. In addition, cloud services offer huge benefits in terms of improved efficiencies, time and cost savings and alleviating employee frustrations over slow processes.
Kristina Russell, UK sales manager at Kefron