Discover 5 Of The Best Tools You Have For Preventing Invoice Fraud With AP Automation
Fraudulent invoices slip through accounts payable far more often than you might think. They’re typically low amounts that don’t need payment approval and show charges for things your company actually buys, such as printer paper or telecommunications services. At first, or even second, glance, they appear genuine and it’s not hard to understand how they get paid along with legitimate invoices.
Invoicing fraud is on the rise and if scammers are targeting your business you will lose money unless you take steps to catch fraudulent invoices. If you’re doing this manually, it requires lots of extra work matching invoices with purchase orders and verifying their legitimacy. But with business process automation, it takes very little extra time to implement five effective tools to prevent invoice fraud.
Employ 3-Way Matching
In many cases, fraudsters submit their fake invoice just under the approval threshold. The fraudster is hoping for payment to go through even though the company name on the invoice isn’t familiar because the amount of money is relatively small. They’re gambling your accounts payable department won’t take the time to double-check each invoice.
Three-way matching is the recommended way to prevent this type of invoice fraud. This method involves matching your company’s internally generated purchase order with both the invoice received from the supplier and the shipping documents that arrive with purchased goods. NextProcess’ AP Automation Software and Purchase Order Module do this automatically, significantly reducing the risk of paying fraudulent invoices with no extra work for the accounts payable department.
Enable Vendor Self-Checks
Sometimes, criminals use legitimate companies and invoices in their scam. Rather than submitting a fraudulent invoice, they submit a bogus request from a supplier you already work with asking for a change of banking details. The next invoice that comes through is legitimate, but you’re paying it to the fraudster’s bank account.
In a paper system, catching this type of supplier invoice fraud involves contacting vendors directly to check on any changes to their payment system. With NextProcess’ AP Automation Software, though, you can grant your legitimate vendors controlled access to the system so they can update their own information, check payment status, and submit missing invoices. This cuts down on the risk of paying invoices to the wrong bank account.
Use “Fuzzy” Matching to Catch Duplicates
Another type of invoice fraud is duplicate or near-duplicate payments. This typically happens accidentally at first when a legitimate supplier submits two invoices without any fraudulent intent. If someone at that supplier notices the duplicate payment, though, they may decide not to report it and instead send two invoices again hoping for another double payment. At that point, it becomes invoice fraud.
Duplicate payments rarely happen in the first place if your company is using an automatic accounts payable system. The system will catch irregularities, such as a repeat invoice number from the same supplier. Then, you can deal with potential problems as they arise. And if you’re using a system that employs “fuzzy” matching, you’ll also catch any near-duplicate invoices that fraudsters try to slip in under the radar.
Support Your Employees
It might surprise you to learn that most fraud happens from within the company. According to KPMG’s 2016 report “Global Profiles Of The Fraudster,” 65 percent of fraudsters are employed by their victims. Another 21 percent are former employees. That certainly doesn’t mean all (or even most) of your unhappy employees will become criminals. But it does demonstrate the importance of monitoring employee activity and happiness closely.
There’s another good reason to keep your employees happy as well. Most fraud isn’t caught because of internal controls. And fully 44 percent of fraudsters are caught because of a tip, complaint, or formal whistleblowing hotline. It’s definitely to your advantage to create a company culture where employees are comfortable reporting suspicious behavior.
Track Your Invoices
Next to tips from employees, the most common ways companies catch fraudsters are through management reviews, by accident, or with an audit. All three of those things will be easier to do if you’re tracking invoice activity closely. That way, you’ll notice if and when something changes. For example, if a supplier who regularly submits five or fewer invoices a month suddenly submits 50 you’ll want to check if they’re legitimate. But first, you need the tools to notice when that happens.
Automated accounts payable software makes it possible to track everything that happens with your invoices. NextProcess’ AP Automation Software enables real-time tracking for every invoice in the system. With just a few keystrokes, it lets you look up information about the invoices you’re currently processing. The automation system also sets up a searchable document repository. That lets you quickly pull up past invoices and check for trends.
The best tools you have for preventing invoice fraud are easiest to use once you’ve automated your accounts payable department. AP automation software makes 3-way matching and fuzzy matching easy, helping you catch duplicate and other fraudulent invoices quickly. Accounting software also helps your employees by making their jobs easier. And it gives them the extra time they need to focus on preventing fraud and catching fraudsters.
Automatic software also leaves a clear audit trail. That helps you catch any type of invoice fraud that might slip through the controls you already have in place. So if you’re ready to use AP automation software in your fight against fraud, contact us today. We’ll set up a no-strings-attached demonstration to show you first-hand how business process automation can help prevent invoice fraud and save your company money.