If someone had told you a decade ago that fraud would go on to become the single biggest concern for modern businesses, you’d probably have brushed it off as mere banter. But now, it really is. Fraud is getting smarter by the day, with the average business losing 5% of its revenue to fraud each year.
AP departments typically process thousands of invoices and payments per month. This, as you’d imagine, makes them a prime target for scams. It’s worse if your company is still using manual, outdated AP processes. These are notorious for lacking visibility and control, constantly leaving companies at the mercy of fraudsters.
The ongoing wave of automated AP fraud detection is calling for a leader, and who better to step up than your finance team?
The Most Common AP Fraud Schemes (and How They Work)
Understanding the types of financial fraud in accounts payable is the first — and arguably the most important — step toward tackling the issue:
- Duplicate invoices: Fraudsters often submit the same invoice twice in the hope that the duplicate will pass through controls unnoticed — and a few do. That’s because humans are not nearly as accurate as automated solutions. Internal employees can also accidentally cause fraud by submitting/processing duplicate invoices.
- Fake vendors: In this well-orchestrated scheme, fraudsters create fake vendor accounts to divert payments that were intended for legitimate suppliers. They typically go unnoticed because these accounts look genuine on paper, complete with a format that imitates the real vendor's invoice to a tee. Only the right accounts payable fraud prevention system can stop such schemes in their tracks.
- Inflated invoices: Vendors may craftily submit invoices with inflated charges. Without fully functional vendor fraud prevention mechanisms, minor price increases and substantial overcharges alike may get through.
- Unauthorized approvals: In organizations with weak internal controls, invoices may end up in the hands of unverified individuals — and bad actors won’t hesitate to approve them.
Why Manual AP Workflows Make Fraud Worse
As fraud schemes continue to evolve at an unprecedented pace, manual AP workflows have only worsened the situation. Here’s how:
- Lack of invoice visibility: Accurately tracking paper invoices and email approvals down to the most minute detail is an untenable task for the majority of humans.
- Human error increases risk: In an ever-busy, high-volume AP department, it’s easy for your staff to miss red flags.
- Slow approvals create opportunities for fraud: The longer an invoice remains unverified, the easier it is for fraudulent payments to get through unnoticed.
How AP Automation Stops Fraud Before It Happens
AP workflow automation has long been lauded for feats like reducing turnover in high-stress industries, but it can also stop fraud in its tracks — in real time, too:
- AI-powered invoice validation: Automation can leverage AI in finance security to tackle a problem humans have consistently struggled with — catching duplicate entries before they’re paid. At the core of duplicate invoice detection is a meticulous operation that tirelessly checks invoices against existing records.
- Vendor verification tools: An important subset of real-time AP monitoring, automated vendor validation makes the most of AI tools to quickly flag new vendors. In mere seconds, these tools cross-reference the submitted details against up-to-date databases to instantly determine the account’s legitimacy.
- Automated approval workflows: Granting the right people approval rights is what AP automation does best for fraud prevention. It enforces a structured, well-controlled process that makes it downright impossible for unauthorized personnel to sign off on payments.
- Real-time fraud alerts: At the slightest sign of suspicious invoice activity — whether that’s a pricing anomaly or an unapproved charge — the relevant team members are notified right away for an instant review.
Why Finance Teams Are the New Fraud Fighters
Not long ago, finance teams had their backs against the wall. They’d get wind of fraud long after it happened, at which point the damage was too severe to undo. Then they’d erect new processes to prevent similar occurrences from happening in the future. AP automation takes an entirely different approach.
Today, finance teams are no longer playing defense. Instead, they’re leading the charge against fraud. Thanks to AI-driven tools that provide real-time alerts and proactive safeguards, finance teams are better able to identify and stop potential threats in their infancy — way before they can cause irreparable harm.
If that’s not a good enough reason to adopt AP automation for fraud detection, consider the significant savings your company stands to gain post-adoption. Zero fraud cases would mean zero opportunities to lose money — that’s potentially millions saved every year. Besides, it’s a no-brainer way to build trust with your stakeholders.
Final Take
Fraud isn’t just an IT or compliance problem — it’s a finance problem. As companies face relentless, overly sophisticated threats from fraudsters, finance teams must take a leading role in keeping these attacks at bay. The right AP automation tool can protect your company’s finances while supercharging your efficiency.
At WorldView, we help businesses set up AP automation and prevent fraud. Learn more about WorldView’s AP Workflow Automation.
