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The Resource for the Global Finance Profession

AP Automation Fortifies Defenses Against Fraud, Money Leaks

  • By Brent Meyers
  • Published: 2016-02-26

automatronOf late, accounts payable (AP) departments have been reporting a surge in duplicate and fraudulent payments. While separation of duties and education on best practices are musts for plugging the holes, new technologies are also being deployed to proactively detect and mitigate new payment risks. It’s extremely difficult to stop money leaks in a paper-based or even a partially automated system. Reducing these losses should be part of any business case for AP automation.

Duplicate payments

Duplicate payments are the most common and least harmful money leak, because in most cases you’ll get your money back. These typically happen when payment is tardy and the supplier sends another invoice, and both get paid. Other times, AP and procurement get their wires crossed and one pays by card, and the other pays by check. Crossed wires also happen frequently in multi-remit locations where one location acquires the goods or services, but headquarters is paying for everything.

Usually these instances can be resolved and you can recover the money, but what you can’t recover is all the time spent.

Late payments

Late payments are a procedural problem. You’ve got to have a process in place to get an invoice in the door and a payment out the door within 30 days. If you can’t do that, then you have issues inside your organization, such as too many people touching and approving invoices. There are probably a lot of soft costs associated with that, and hard costs too—lost discount opportunities, late fees and interest penalties. This is money you can’t get back.

Fraud

In a paper-based system, fraud can go undetected for a long time.  There are phishing schemes where fraudsters send out thousands of fake invoices just to see how many people will pay. If they’re busy and the invoice looks legit, some people will just add it to their supplier master and pay it.

Card fraud can be both internal and external. Internal and external people can get ahold of credit card numbers if you don’t use single-use virtual cards, as ePayments solutions do. Internally, fraud can result from setting up fake suppliers and paying their invoices.

Automation to the rescue

AP automation helps address common money leaks and fraud at every phase. There are really three parts to AP automation—invoice receipt and imaging, the approval workflow, and payment. Think of them as three layers of a net, each of which stops some leaks at the source.

Invoice capture and imaging automation is the first line of defense. These systems can detect and flag duplicate invoices. They speed up the whole receipt and data entry part of the process, helping cut down on late payments. And, they help eliminate fraud opportunities since incoming invoices are scanned and matched against the supplier master; any suppliers who don’t match up automatically trigger an alert to investigate further.

Workflow automation takes over from there. The big benefit of this piece is visibility. You can get more eyes involved in the process, and still move much faster than in a manual system. Everyone can see invoices as they work their way through payment process. It also helps reduce the possibility of duplicate payments, especially those that result from “Where’s my money?” calls.

Workflow automation really speeds up processing. You can build in business rules to let people approve invoices simultaneously, instead of sequentially, and from their mobile devices. This eliminates delays caused by walking paper from desk to desk, and waiting on approvers who are out of the office. Finally, increased visibility leaves few places for fraudsters to hide.

E-payments are the last piece of the safety net, and arguably the best place to start with AP automation. Cloud solutions can catch duplicate invoices, short payments and unmatched suppliers either as a first line of defense, or integrate with workflow systems for additional layer of security in a fully automated system. They also help with speed—you can schedule payments down to the minute and know exactly when they’ll get there, so you can maximize cash and still get discounts. Cloud e-payment solutions also provide an additional layer of security beyond PostivePay, such as OFAC checks on suppliers.

The savings from getting rid of most of paper checks, coupled with the rebates you get from increased card payments make automating this piece as close to a no-brainer as you can get. It pays for itself and you can finance the rest of your automation program with the rebates.

Anytime people are involved, there’s always the potential for, and the reality of, human error. Most companies automate AP to streamline workflows and cut processing costs, but fraud prevention, plugging common money leaks, and improved audit capabilities should be part of your business case as well. Automation can give accounts payable not only the visibility, but the time to handle errors, exceptions and red flags before the money goes out the door, perhaps never to be seen again.

Brent Meyers is the vice president of national sales for Nvoicepay, a provider of B2B payment services.

Copyright © 2016 Association for Financial Professionals, Inc.
All rights reserved.

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