Why Invoice Fraud Is Real And How AP Automation Can Protect You
The disruption caused by the COVID-19 pandemic has forced businesses into making changes to their processes. But in some cases, this has increased company vulnerability, particularly to threats like invoice fraud with opportunist fraudsters taking advantage. However, companies that have embraced AP Automation find themselves better protected against fraud.
Invoice fraud has been growing in recent years. In fact, according to a survey carried out by UK Finance, UK businesses lose around £93 million (€100 million) every year to invoice fraud. The research has always shown that 43% of UK businesses are unaware of invoice fraud, despite more than 3,000 invoice and bank mandate scam cases being recorded in 2018.
While companies commit considerable investment to protecting against digital threats, and adhering to GDPR obligations, there is clearly still a need to protect against more traditional financial scams. In the case of invoice fraud, investing in a reliable automated AP system can help companies greatly lower their vulnerability to this kind of crime.
How Does Invoice Fraud Work?
A well-executed invoice fraud scam can be very difficult to detect. It comes down to a third-party submitting a fake invoice to a company in the name of a known supplier and waiting to be paid. The company believes they are legitimately paying for goods or services received, so it can often go unnoticed.
It might seem like fraudsters are chancing their luck, but those who carry out invoice fraud spend a significant amount of time researching companies before identifying their next victim. In fact, according to a study by the Association of Certified Fraud Examiners (ACFE), fraud schemes can take an average of 16 months between initial research and carrying it out.
A key part of their research is identifying the company’s regular suppliers and their typical invoicing patterns. The fake invoices seem to come from a genuine supplier, so no questions are likely to be asked.
Process Weaknesses That Boost Invoice Fraud
There are four weaknesses a company might have in their AP processes that could play not the fraudsters’ hands:
- Poor Communication
- Poor Process Controls
- Complex Procedures
- Poor Invoice Tracking
Each of these weaknesses are typical of manual accounts payable processes. They are paper based, have multiple approval levels and often lengthy verification processes.
How AP Automation Deals With The Problem?
AP Automation is an effective way to combat invoice fraud because it eliminates the manual processes fraudsters take advantage of. There are five principal aspects that help to protect businesses:
- Enhanced Visibility & Verification – because invoices are centralised, each one arrives via a single route, making it easier to spot an unexpected or unconfirmed invoice. It also means all data relating to suppliers and service providers is easily verified.
- Clearer Automatic Approval – by automating approvals, the process becomes more direct and leaner. This is because invoices are routed to only the appropriate parties, with reviewers able to view and comment on invoices.
- Easy Cross-Referencing – automated AP software cross-references GRNs and Purchase Orders with Supplier Invoices. The three-way referencing systems means more concise reconciliation of AP records, which in turn ensures greater security against invoice fraud.
- Duplicate Checking – the old systems made invoice duplication easy, with the same invoice appearing multiple times. AP automation immediately alerts users to any duplicate invoices received.
- Supplier Portal – automated AP software provides suppliers with the ability to view their processed invoices. While this means supplier queries are reduced, it also means fraudsters are no longer hidden from suppliers’ eyes.
In essence, AP Invoice Automation can assist with Fraud Mitigation in your business by implementing control features that offer a greater level of transparency and accountability in your processes.
Kefron’s Automated Accounts Payable solution, Kefron AP, identifies discrepancies between invoice data and supporting documentation, creating a more robust AP controlled environment and reducing fraud risk to a minimum. Book a demo today to learn more.
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Kefron provides a range of information management solutions including Document Scanning, Accounts Payable Automation and Electronic Document Management solutions. We work to the highest international standards and we are proud to hold four ISO certificates, including ISO 27001 for Information Security.
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