Accounts Payable News^®

Accounts Payable fraud is one of the easiest types of fraud to commit, and yet its often one of the most difficult to detect. By its nature, accounts payable exposes some of the most sensitive data held within an organisation. Therefore those working within it have both the exposure and the temptation which would be unavailable to those working within other departments.

Obviously most people working within AP are doing so to the financial benefit of the organisation but there will always be a small minority who see it as a chance to siphon a few (or many) pounds for themselves. In other cases the element of fraud is not so obvious – for example where a supplier knowingly supplies a duplicate invoice for payment.

What you can’t do, is stop someone from trying, or wanting to try to defraud an organisation - what you can do is put systems in place to make it difficult in the first place, and to detect any activity already undertaken. If an employee or supplier thinks that there’s a good chance of any underhand activity being discovered, they’re less likely to follow through with their plans.

Interestingly employees who commit fraud generally fall into two categories – long term employees and temporary workers. In terms of monetary value, it’s the long term employees wary CFOs and AP Managers should be looking out for. After all, they have built up trust, they know the suppliers and systems inside out and back to front – sometimes they are even the ones in the driving seat behind implementing new processes – and of course sometimes they are the manager themselves. Temporary workers who indulge in fraud or petty theft tend to be involved in activities such as creating low value false invoices or purchasing goods for themselves at values which fall below the lowest approval threshold.

So how do you ensure that your organisation doesn’t suffer from accounts payable fraud?  Firstly an organisation needs to take a close look at its structure and processes and analyse any areas where there is a potential loophole and look out for patterns of repeat behaviour. Frequently people conducting fraud are simply taking an opportunity - they are not necessarily adept at covering their tracks. For example, many fraudsters are caught because when something works once, they’ll try it again, and again and that is when they get found out. For most organisations, an investment into new technology if not already in place, will have to feature in the next five year plan. With many solutions out there to choose from, it's a question of finding the right one for your organisation, at the right price. Automation will provide many of the answers, but it can only really be effective if its placed at the centre of an existing tight set of procedures, overlooked by a skilled (human) eye.

In addition, a tightening of processes within accounts payable can have significant effects on areas other than fraud. If payments are being analysed for duplicates and master supplier files are being checked for erroneous entries and the AP manager has a new step by step process to follow from receipt of PO through to payment – then the cost per invoice goes down and the money savings go up, with is good news for the business and great news for the reputation of the AP department.