controller fraud prevention best practices

10 Ways Accounts Payable Can Prevent Fraud (What Every Controller Should Know)

Fraud of any kind can deliver a massive blow to your business both financially and to your reputation. It is often attempted in the form of fraudulent invoices being submitted for payment. Companies of any size can fall victim to wily tactics. Fraudsters target small companies hoping that the lack of manpower will result in negligence. They target large companies hoping things get lost in the bureaucratic shuffle. Accounts Payable must be constantly vigilant to avoid processing false charges.

End-to-end transparency, and the ability to process each invoice knowing its full context, is key to avoid paying fraudulent charges. Synchronization between Accounts Payable, approvers, and the receivers of the goods or services provided by the vendor is a critical component to successful fraud prevention strategy.

Mary Schaeffer, founder of AP Now, has 10 tips for any organization hoping reduce fraud risk:

1) Fraud is NOT a Big Picture Issue

Control over your AP is in the details – dig into the minutia, look for the loopholes, and apply your controls across the board. Giving special exceptions or otherwise compromising your internal controls is a fraud magnet.

2) Realize Fraud is Both Internal and External

Employees are not completely exempt from suspicion either. They’re the ones who know where the weaknesses in your system are. Even long-term, trusted employees can commit fraud so consistent controls are essential to reduce risk.

3) Incorporate Strong Appropriate Internal Controls Across P2P

Make sure no one person does more than one leg of your Procure-to-Pay process. When you separate the duties, it increases accountability. This compensating checks-and-balances approach can help catch mistakes that one person may have missed.

4) Don’t Overlook Travel & Expense Fraud

Fraud is fraud, even if it comes from inside the organization. Expense reimbursement can cost your company money as much as anything else, and it tends to add up over time. In addition, someone who has successfully defrauded your company in one manner may be tempted to defraud you in other ways, as well.

5) Avoid Common Weak Practices

These are the simple, easy mistakes to fix – and you’re shooting yourself in the foot if you don’t address them.

  • Don’t allow an excess number of rush checks.
  • Don’t permit management to override your procedures.
  • Ensure the master vendor file is handled with proper practices.
  • Make sure duties are segregated among your staff.
  • Don’t return checks to requisitions.

6) Incorporate Controls Around All Payment Types

Every type of payment requires its own controls – you can’t use the same exact system for, say, check fraud and corporate card fraud. Develop protocols for every kind of payment type you handle, and update them regularly to ensure you’re still using the best practices.

7) Establish a Policy of Zero Tolerance

Zero tolerance means zero tolerance. It doesn’t mean give an exception to a friend or writing something off as a mistake. Fraud, corruption, and ethical misconduct are not mistakes to be tolerated.

8) Educate Your Staff

Most AP processing mistakes come about as a result of lack of knowledge. Fraudsters target lower-level employees who may not be up-to-date on the latest techniques; they’re looking for the easy ins. To avoid this scenario, practice:

  • Educating your staff on fraud prevention, and keep them up to date so they know what to look for and what to avoid.
  • Explaining why a process is in place is much more likely to achieve compliance than just stating that a process exists.

9) Take Advantage of Automation & Machine Learning

Automation, when properly applied, can remove human error from many steps of your AP processes. While you never want an invoice to be entirely automated, proper automation can reduce costs and make AP more efficient. Allow technology to take you one step further than automation, and research solutions that incorporate machine learning to help AP run even more smoothly.

10) Regularly Update Yourself on New Frauds and Fraud Prevention Processes

Fraudsters are constantly looking for the next big scheme so regularly evaluate and update your strategy.

  • Assume your potential fraudsters are smart and determined, and keep yourself up to date on defense.
  • Attend webinars and seminars.
  • Read the latest reports on fraud prevention best practices.

Do all you can to keep yourself one step ahead of the fraudsters so you can prevent damage before it occurs! Do you have any best practices you’ve implemented to prevent fraud at your company?

As Mary points out, transparency and accountability in Accounts Payable is key to fraud prevention. Stampli brings these qualities to the AP process with collaborative digital invoice landing pages that make it easy to communicate with approvers and vendors to verify invoices.

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