How Invoice Context in Approvals Can Reduce Fraud Risk

How Invoice Context in Approvals Can Reduce Fraud Risk

In the cut-and-dry, numbers-oriented world of Accounts Payable, it can be easy to forget the human relationship represented by every invoice that passes through your hands. After all, your job is to get the invoice processed and approved as quickly as possible to make sure vendors are paid on time, and the company cash flow remains up-to-date. The approvals you need to collect are just signatures on a line – sometimes as elusive as your car keys in the morning.

However, that human relationship is key to addressing one of Accounts Payable’s biggest challenges – fraud prevention. This scenario illustrates why:

AP Clerk Amy receives an invoice from a long-time vendor. She knows the Marketing department frequently works with this vendor on trade show collateral. This invoice contains charges for some graphic designs. So, with everything looking legitimate, she forwards the invoice to Marketing Director Sam, who is the designated approver for all Marketing-related invoices. Sam’s a busy guy though, so he glances at the invoice, recognizes the vendor name as someone that his Creatives Manager works with frequently, and approves it to be paid.

Usually this scenario works out fine. But, what happens if that graphic design work was never completed? Trouble for the company – trouble which lands on Amy’s head. And she isn’t alone; 17% of companies surveyed by Kroll in 2015 were affected by vendor fraud.

Why Invoice Context Matters

In the scenario above, if Sam had been able to easily loop the Creatives Manager who actually placed the order in on the conversation surrounding the invoice, the fraudulent activity would have been discovered immediately.

The invoice represents a relationship between not just two companies, but also the people within those companies. Enabling communication at every step of the approvals process strengthens these relationships, and allows for a natural exchange of information.

Ultimately, no invoice should be approved without the original requestor and receiver of the goods or services in question having a voice in the conversation. Questions can be fully answered, additional information and supporting documents included in the conversation, and the invoice can be approved by the person who truly knows whether it should be. True context = verification and accountability.

They say an ounce of prevention is worth a pound of cure. As an Accounts Payable professional, you should do all you can to ensure that each invoice approved represents a mutually satisfactory exchange within your organization, and with your vendors. This transparency throughout the process will go a long way towards reducing the risk of fraudulent payments.

2018-08-09T15:00:07+00:00