Freedom from Accounts Payable Fraud
According to a new report from Invu, 72% of respondents say at least one of their financial processes exposes their company to the risk of fraud. Accounts Payable departments often find themselves in the line of fire when it comes to fraud since they are responsible for verifying that invoices are truly ready to be paid.
If you are a Controller, you need to ask yourself a hard question: Does my department need to make process improvements to protect the company against fraudulent payments?
If the answer is “yes”, then there is no time like the present to examine the financial processes of your organization and identify ways to stop accounts payable fraud in its tracks.
Three Ways to Reduce the Risk of Fraud in Your Organization
- Keep your accounting system as the one source of truth.
- Institute segregation of duties.
- Involve not only the approvers, but also the people that were actually involved in the transaction.
The first two points are common sense. By keeping everything updated in your accounting system, all records are available on demand. Segregation of duties ensures that no one employee has all the power to approve invoices for payment.
The third point, we’ll explore more in-depth. One of the most common “weak points” in the AP process is that, despite AP’s best intentions, the invoice is not often sent to the person(s) who truly know whether the service terms in an invoice have been met. Often the approver and the person(s) who actually received the goods or services are not one and the same. The manager who receives the invoice from AP must then forward it to their colleagues to track down the person who requested those things to know whether or not to approve it. If they are busy and rushed, they may simply approve it without double checking with their team. To prevent the approval of invoices that haven’t been thoroughly verified, it must be easy for employees to invite other people to participate in a single conversation.
You Know an Invoice is Ready to be Paid When….
In order to truly verify that an invoice is ready to be paid, Accounts Payable needs to verify that the commercial terms match what was agreed and the goods or services have been delivered as promised. However, there is usually only one person in the organization with this knowledge – and that person is not always the person that AP initially sends the invoice to for approval. When the path to approval relies on emails, phone calls, and paper invoices passed around the office, AP’s visibility and control over the process suffers.
Here’s what it takes for your AP to know that an invoice is ready to be paid:
- All employees in an organization should be able too easily join the conversation to answer questions, and add content/supporting documents if needed. This also means that approvers can identify additional approvers, or add other employees to the conversation. No more forwarding emails to team members!
- Vendors and external contacts can be invited to participate if there are questions about the terms of service or pricing.
- More context can be provided when PO and receiving information is shown on the invoice page.
What it boils down to, is that improving communication in the Accounts Payable process will go a long way toward reducing the risk of fraudulent invoices and B2B payments. If your AP team is empowered to own a collaborative process that can ensure the invoice reaches the person who knows that its terms were met, true verification is possible.
