Technology in accounting grew many times over but so did the sophistication of payment frauds. More than 78% of the businesses experienced an attempted or an actual B2B payment fraud in 2021 alone. And almost all of them involve fraudulent invoices.
Accounts Payable – A Ripe Ground for B2B Payments:
There was a time when Accounts Payable is a breeding ground of payment fraud – unfortunately, it still is. Even more so if it is a manual AP. Many growing businesses with high volume transactions and a large number of suppliers neglect this essential area until they get hit by B2B payment scams.
At Outsourced Bookkeeping, we are often get consulted by many growing businesses that fell victim to these elaborate AP frauds. In most cases, the perpetrators tend to be vendors, suppliers, scammers, and cybercriminals and even own employees. Here are the most common types of Accounts Payable fraud suffered by these businesses:
Internal Fraud: Billing schemes, Employee reimbursement fraud & kickback fraud.
External Fraud: Wire transfer scams, Phishing attacks or business email compromise, Identity theft, & Account takeover.
Lack of tight security controls & role diversification, ignored audits, too much dependency on limited AP staff, and muddled AP process are some of the reasons that make them vulnerable to these payment frauds. Even businesses that fill these AP gaps may also fall victim to these payment frauds due to the sophistication of the frauds powered by technology.
The only way for business to make their business fraud-proof is to have a seamless and secure AP process powered by automated AP technology.
5 Ways AP Automation Can Eliminate B2B Payments Fraud:
AP automation gives much-needed control and security back to the business by establishing full control over the process and customizing the security protocols according to the business process. Here’s exactly how it can mitigate the AP fraud:
1. Centralizes your AP process:A muddled and decentralized AP process is the primary reason for AP fraud. A manual AP process where a single person carries too many responsibilities, where invoices are paid by multiple employees without monitoring, that still adheres to manual checks, and operates over many locations is a breeding ground for AP fraud. It provides multiple opportunities at every turn resulting in AP fraud in multiple ways. The simple and most efficient way to build a fraud-free AP process is to centralize the AP activities on a single platform that enables 360-degree monitoring, segregated responsibilities, and complete visibility with ample security. This can help AP managers quickly identify the discrepancies and conduct necessary verifications before it’s too late.
2. Provides payment controls based on your process:Accounts Payable automation gate-keeps the process by providing multiple security controls and verifying mechanisms as needed by the business. For example, our AP automation system at Outsourced Bookkeeping provides the following:
- Duty Segregation:By proving separate access to the approvers, managers and authorizers, AP automation makes segregation of duties possible to reduce the risk of fraud. This segregation mitigates internal fraud by preventing fraudulent payments that happen without adequate monitoring and verification.
- Dual Factor authentication:Even with tight security control made possible by segregation, account takeover can happen anytime without multifactor authentication. AP automation provided these checkpoints to further secure the payments.
3. Simplifies 3-way Matching:Two-way matching leaves a lot of room for errors and fraud and yet most businesses make do with this process due to lack of time and personnel. Not only it is risky, but it is also tedious and time-consuming
Dual Factor authentication:Even with tight security control made possible by segregation, account takeover can happen anytime without multifactor authentication. AP automation provided these checkpoints to further secure the payments.While three-way matching increases security it is even more time-consuming that requires a lot of effort unless one leverages automation software. AP automation software makes 3-way matching extremely fast and higher accuracy which enables any business to use 3-way matching for their invoice processing.
4. Analytics that track invoice data and scrutinize amounts:AP automation software today is equipped with analytics that catches invoice discrepancies before they happen. Analytics solutions identify the deviation from the established patterns in invoice data to flag inconsistencies. When there is sufficient invoice data advanced AI and Machine Learning algorithms catch the anomalies in data making it harder for fraudsters to deceive the system.
5. Eliminates paper process and secure payments:Check payments are the no.1 reason for AP fraud in businesses. And yet most businesses still stick to manual processes due to a lack of resources and expertise. AP automation eliminates the paper process, segregates the duties, enables security checkpoints and makes electronic payments possible with versatile payment methods that are safe and secure. This way AP professionals can even schedule and queue up their payments without any risk. Speaking of payment options, the riskiest ones tend to be cross-border payments that present a greater potential for bottlenecks and hiccups. AP automation smoothens the payment process while securing at the same time.
That said, not every business has enough expertise or capital at hand to leverage an AP automation solution. If you are one of them you can completely benefit from AP automation by outsourcing your Accounts Payable to remote accounting firms like Outsourced Bookkeeping. You can find us here: https://outsourcedbookeeping.com/