Fraudulent Activities in Accounts Payable: How Businesses Can Prevent Them
A less effective and poorly guarded accounts payable system can be quite susceptible to getting misused by someone in the organization, planning to commit some financial fraud. And, if this goes unchecked by the AP department for some time, then it can lead to some significant economic issues for the business.
Accounts payable fraud is innumerable and mostly takes place when the accounts payable department writes checks to unknown vendors. If detected, legal actions should be taken against such crimes as it leaves a paper trail.
You cannot see the signs unless you get the idea of where to look. The accounts payable department has evolved several effective ways to stop accounts payable fraud and minimize the chances of it taking place.
Here, we present some great ways to detect and prevent fraud in accounts payable in business.
a)Track Duplicate Payments
It is true that vendors do not want to defraud a company intentionally, but there are situations where a supplier can send duplicate invoices. Duplicate payments are created for the same services. There are some accounts payable solutions that can perform a duplicate invoice check. The solution ensures that duplicate requests get caught for every payment that is made through accounts payable software.
b)Conduct Audit Trails
Traditional accounts payable processes require you to work with many paper documents, which may sometimes lead to misplacement of essential documents. With the help of automated accounts payable software, the filing of important documents are made simple and so is recalling of complete lifecycle of a receipt or an invoice. It becomes easier for an organization to identify any unusual behavior or activities, who have executed the action, when, and confirm the reason behind it.
Automated services make it easy to identify missing invoice details such as quantity, description, and monitor an unexpected rise in invoice volume, notes down supplier price change, and more.
c)Integrating Accounts Payable with Procurement Software
Integrating procurement and accounts payable functions makes sure that the goods are ordered as per the purchasing policy and are received before invoice payment. A good relationship between accounts payable and procurement allows the AP department to get a clear idea of the company’s purchasing habits and keeps an eye on invoice validity. It is beneficial for preventing a fraudulent payment.
d)Leveraging Data for Tracking Trends in Vendor Performance
Organizations that use data can identify overpayments by tracking trends in vendor spend. This helps companies to take a proactive approach to prevent any duplicate payments by identifying fraudulent invoices and routing them for review.
e)Verifying Suppliers
Daily supplier review is an integral part for detecting accounts payable fraud. In the initial stage, you need to approve each supplier before they get listed in accounting software. When you are unable to identify a supplier, verify manually who they are and what goods or services you are purchasing from them.
Verification can be done in simple ways such as making a phone call or checking online. Some other signs include supplier addresses that match with employee addresses, checks delivered to home addresses or post office, and suppliers that have the same contact information.
The Bottom Line
Accounts payable department must understand the signs to identify frauds and save the organization from its consequences. Timely detection and constant tracking can prevent employees from committing fraudulent activities that can ultimately have a massive impact on the organization.
