One of the most critical tasks in business operations is processing accounts payable transactions, which is crucial for controlling cash flow and project budgets. Unfortunately, fraud is becoming more prevalent and expensive to a business because the accounts payable function is susceptible to insider and outsider fraud. Strong internal controls aid in the early detection of fraud and prevent internal conspiracies, saving your company money and time. The accounts payable division ensures that business operations run smoothly. They sustain your vendor relationships to ensure you have all of the products and services your business requires to remain in business. But what transpires when an Accounts payable worker commits fraud?
Let us first enlighten ourselves about the most common types of accounts payable fraud:
- Supplier’s invoice fraud: Invoice fraud can take many different forms, but the most typical one is a fake supplier invoice. Simply put, a scammer can make a fake invoice that appears to be from your supplier but uses a different bank account. They frequently use an email address that is only one letter different from your supplier’s email address. This fraud can be incredibly successful if your company still manually processes payments based on each invoice.
- Scammers: Scammers can make it even simpler for themselves by simply hacking into your supplier’s email address and informing you via that email that your supplier’s bank account has changed. And thus, your business will go through invoice fraud.
- Check fraud: The employee forges your company’s signature on a check written to them or writes a fake check. Additionally, they might change a check’s payee, address, or amount to match the details of themselves or their shell company.
- Shell company: The employee fabricates a fake business, generates invoices for that business, submits the invoices for payment, and then routes the payments to a PO box or other address under their control. To ensure that the invoices are submitted covertly, they might need to forge a coworker’s signature on them.
Now we know what the typical kinds of accounts payable fraud are. Detecting and preventing fraud is the foremost step to save your business from scams. A legitimate financial background makes fraud stand out like a sore thumb, so it’s critical to proactively and randomly audit financial records in the accounts payable process before the fraud takes hold and blends in. Therefore, always check on your employees.
Rotate the personnel in key financial roles in the account payable process. Otherwise, they can take advantage of their secure position to find weaknesses. With each rotation, financial records can be examined to look for discrepancies. Deploy employees and even outsiders a way to inform the company about fraud anonymously. By doing this, an atmosphere of accountability is created, and tip-offs may even be rewarded.
Finally, by consistently matching expenses to payments, an automated system streamlines the approval process and removes the need for human intervention. Since virtual credit cards are only issued for approved payments and cannot be used again for fraud afterward, they help prevent fraud. The company can implement a system where money is automatically approved for a single expense on a virtual card.