How to Prevent Fraud with AP Automation

If your AP department is understaffed, swimming in paperwork, and struggling to keep up with a growing workload, you’re a primary target for accounts payable fraud.

Unfortunately, this is the reality for most AP departments still relying on manual AP processing. According to AFP’s 2022 Payments Fraud and Control Survey, 71% of organizations report having been victims of payment fraud in 2021, with causes including:

• Internal threats. More than 30% of payment fraud incidents in 2021 involved trusted employees.
• Platform fraud. 40% of organizations that reported accounts payable fraud were victims of platform fraud.
• Fake & overcharged invoices
• Business email compromise
• Money mules

But for overextended AP teams, implementing additional security measures like adding extra approval steps is too complicated to be sustainable.

The good news. AP departments no longer need to choose between simplicity and security, thanks to AP automation. This technology combats fraud by creating audit trails, securing system access, boosting efficiency, and more.

Let’s dive deeper into these accounts payable fraud-fighting benefits and five other ways AP automation can help you prevent fraud.

8 Ways AP Automation Increases Accounts Payable Security

1. It Lets You Gain Control by Limiting Access to Invoices

The more hands touching a paper invoice before it reaches your AP department, the higher the risk of misplacement or disappearance. It also increases the chances of the invoice getting intercepted and replaced with fraud. Digitizing and automating your invoice processing helps you regain control and reduce these risks. For example, under automation, your suppliers submit invoices directly into your system. This arrangement limits the number of people who access the invoices, lowering the opportunity for fraud.

AP automation also increases data security by giving you controls that restrict access to vital information, including features like:

Positive Pay Files

Positive pay files are automated fraud detection tools that transmit a file of all issued checks to relevant banks daily, allowing them to verify each payment’s authorization.

Segregation of Duties

AP automation assigns separate roles for approvers, authorizers, and managers. As a result, each payment must be verified by multiple employees before it can be released, which reduces the chances of internal fraud.

Dual-Factor Authentication

For the segregation of duties to be effective, you need strong passwords. That’s why AP automation allows you to add dual-factor authentication, a feature that protects you from account takeovers.

2. It Automates 2- and 3-Way Matching

You need to be able to match an invoice to its corresponding purchase order and, when applicable, its goods received paperwork to ensure it’s legitimate. However, if your AP department is already stretched too thin, it can be easy to lose paperwork, making this operation challenging.

AP automation eliminates this issue by automatically matching invoices to POs and GRs. If it can’t find a match, the solution flags the potentially fraudulent invoice so your employees can investigate it.

3. It Detects Fake Invoices

AP automation can also help you catch fake invoices before it’s too late. Fake invoices often ask for a small amount of money and come from a reputable-sounding company so they can fly under your busy AP staff’s radar more easily. AP automation can automatically flag invoices with these traits for manual review and other invoices that arrive unexpectedly.

4. It Empowers Employees to Keep Watch

Fraudulent behavior is often caught through a complaint, tip, or whistleblowing hotline. That’s why you must give your employees the tools to defend against accounts payable fraud. AP automation empowers employees with a system that offers detailed insights into your processes. Your AP employees can use these tools to monitor AP activities and catch potential fraud.

5. It Provides an Audit Trail for Accountability

When you discover potential fraud, it’s essential to have a detailed audit trail of payment authorizations and approvals. However, it can be challenging to achieve this when working with paper or even Excel documents. AP automation gives you peace of mind by automatically generating audit trails you can access when needed. This way, you can investigate the complete history of a potentially fraudulent event as soon as you discover it. Audit trails also make it easier to notice indicators of potential fraud in the first place.

6. It Increases Standardization and Save Time

When you implement AP automation, you standardize and streamline your AP processes. This technology allows you to ensure that each transaction adheres to the same strict checkpoints and that no step is skipped. And without having tedious, time-consuming tasks fill their time, your employees will have more time to investigate potential fraud and pursue other value-added tasks.

7. It Centralizes AP Activity

Staying organized and communicating effectively is hard when you rely on manual AP processes. Invoices often get paid by multiple employees who may not even work in the same office, leaving numerous entryways for fake invoices or internal fraud. Decentralized AP processing also severely limits visibility, making it easier for fraud to proceed undetected. AP automation centralizes your entire AP process, so all invoices travel through the same digital process. Additionally, centralization gives managers complete visibility into every payment in the end-to-end process, allowing them to detect potential accounts payable fraud and intervene before the payment is released.

8. It Helps You Move Away from Riskier Payment Methods

Automating accounts payable gives you easier access to electronic payment methods and even includes built-in virtual card payment options with payment tokenization. As a result, you can shift away from riskier payment methods like paper checks and wire payments.

Stay Ahead of Security Threats

AP automation is a powerful way to secure your business now and in the future. Sure, fraud criminals are clever, so new methods will always pop up. But technology is constantly evolving too. Embracing technology now with AP automation will help you stay ahead of advancing fraud threats. As technology advances, your organization will have the tools needed to detect risk and protect your operations from fraud attempts before they can cause damage.

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