How accounts payable experts prevent fraud before it happens
“The total reported losses to fraud in the USA reached $12.5 billion in 2023, according to the FBI’s Internet Crime Complaint Center.”
Let’s cut to the chase: fraud is a big, fat, costly problem, and no one feels it more than your accounts payable team. Every invoice, every vendor payment, and every reimbursement request is an opportunity for a fraudster to slip something past the goalie. And if you think this kind of fraud isn’t on the rise, think again.
Accounts payable fraud is one of those low-key, high-cost issues that can bleed a business dry if you’re not paying attention — and paying attention means staying ahead of fraud before it has a chance to happen.
So, how do AP experts do that? They don’t just react to problems; they prevent them, day in and day out. They know the red flags. They understand the schemes. They leverage technology to track down any hint of shady activity. And most importantly, they’ve got the strategies to make sure AP fraud gets stopped in its tracks before a dime goes missing.
Here’s what those experts — like the fraud squad at Corcentric StopFraud™ — are doing to make sure AP fraud doesn’t stand a chance.
The many faces of accounts payable fraud
AP fraud isn’t just a one trick pony; it’s a Pandora’s Box full of dirty tactics, each one a little nastier than the last. First up:
- Billing schemes — a classic case where someone sends in a fake or inflated invoice, maybe with a wink and a nod from an inside employee.
- Then, there’s vendor fraud, where phantom companies or even colluding vendors are invented just to siphon money.
- And if you think paper checks are old-school and therefore off the radar, well, 81% of U.S. firms still use them, and that’s 81% of firms that need to worry about check fraud.
Next up:
- ACH fraud and business email compromise (BEC), where a scammer spoofs an email to trick someone into paying up.
- And finally, there’s internal fraud—think padded expense reports or kickbacks to employees who get a cut for pushing certain vendors.
Each one of these scams is a headache all its own, and the bill for ignoring them is steep.
So, what’s the strategy here? AP teams need to layer in some strong internal controls, perform regular audits, get their people trained up, and make sure their vendor verification process is buttoned up. There’s also enlisting the help of outside experts, but more about that later.
Let’s break down how this works.
Spotting AP fraud red flags
If you’re going to catch fraud, you’ve got to know what to look for. First, keep an eye on unusual vendor activity — if a vendor suddenly changes bank accounts or contact details, especially with no prior notice, that’s a blaring siren. Same goes for duplicate invoices. These aren’t just clerical errors; they’re often a crafty way to get paid twice for the same service.
Then there’s altered documentation — missing or changed info that ought to be a clue something suspect might be going on. And if the records don’t add up, that’s a record discrepancy worth your full attention. Finally, rushed payment requests are an old trick to get something through without the usual scrutiny.
These are the kind of red flags that call for vigilance, audits, and a fraud-proof set of controls.
How to prevent AP fraud before it hits your books
Here’s where it gets proactive. Segregation of duties — the gold standard of AP fraud prevention. By splitting up tasks, you make sure no single person can compromise the whole process. And put bank information validation at the top of your list: any time there’s a change, you verify it directly by phone with a known person. No emails, no excuses. That’s the difference between a secured AP process and an open-door policy for fraudsters.
Of course, you can always bring in the AP fraud experts — a whole team of finance, IT, and AP pros working together to implement every best-practice barrier imaginable. Working with AP fraud professionals means benefitting from people who know fraud inside and out, and they use that knowledge to build a fortress around your AP process.
And remember, fraudsters are very clever at inventing and refining tactics. So, by putting the right team in place, your AP department will be in a better position to prevent AP fraud, not just react to it.
The technology edge: AI and machine learning
But even fraud experts need help. To that end, they’ve got some powerful tech on their side. Today’s AP automation systems use AI to monitor every transaction, flagging the ones that don’t fit the norm.
AI is incredibly efficient at detecting fraud because it’s constantly learning, picking up on patterns humans might miss. Plus, it comes with customizable controls — think transaction limits, dual authorizations, and instant alerts. This kind of AP fraud prevention is invaluable for reducing human error and providing real-time alerts when something looks off.
These systems have the potential to catch fraud at the source, but here’s the thing: technology only works if it’s paired with regular reviews. Fraudsters adapt, and so must your defenses. With AI doing the heavy lifting and audits providing human oversight, you’ve got a potent combo that keeps fraud at bay.
Keeping tabs on the trends
The fraud landscape changes fast. Fraudsters innovate—so should you. AP experts who know their stuff are always watching the trends, like the rise in business email compromise or fake invoice schemes. By staying in the loop on what’s out there, AP pros can adapt their AP fraud prevention strategies to fend off emerging threats before they have a chance to take root. It’s not just about spotting fraud; it’s about knowing what kind of fraud you’re likely to see next.
“Business Email Compromise (BEC) scams resulted in 21,489 complaints to the FBI’s Internet Crime Complaint Center in 2023.”
Tightening vendor verification
An excellent defense against vendor fraud starts with knowing your vendors (there are a lot of resources available around KYS – Know Your Supplier). Vendor verification isn’t just a formality; it’s essential. Start by gathering the right information—contact details, tax IDs, and bank info. Then, take it a step further by cross-referencing this data against trusted external sources.
AP teams should also be keeping tabs on vendor activity and any sudden changes that might hint at trouble. This continuous monitoring isn’t just good practice; it’s essential for staying fraud-free.
In the realm of risk mitigation being everyone’s job, AP should work with their colleagues in Procurement, who likely have SPRM tools onboard – Supplier Risk & Performance Management. These robust systems incorporate most, if not all, of the data monitoring tools mentioned above.
Monitoring transaction patterns
Here’s another tip from the AP fraud prevention playbook: track every transaction. With real-time monitoring systems, you can set up alerts for anything that doesn’t fit the norm. Both high- and low-volume accounts need to be watched like a hawk because fraud can pop up anywhere.
Tools like Intelligent AP automation provide AI-powered, real-time insights so no oddball transaction goes unnoticed. When you add regular audits and alerts for big transactions, you’re ready to respond the second something looks off.
Limiting access to the vault
Not everyone on the finance team needs full access to a company’s financial information. Role-based access controls are the way to go, giving each employee only what they need to get the job done. And this isn’t a set-it-and-forget-it deal; regular reviews and updates keep these privileges current and secure.
Enforcing a segregation of duties (as mentioned above) makes it even harder for anyone to cook the books. Think of it as building accountability into your AP fraud prevention process — less access means less risk.
Risk management: the AP fraud expert’s toolkit
Integrating risk management into your AP process is all about proactively spotting trouble before it hits. As part of the SPRM solution referred to above, supplier scorecards let you evaluate vendor reliability at a glance, while OCR and machine learning keep errors out of your data and spot inconsistencies fast.
When you combine these tools with a structured approach to vendor assessment, you’re covering all your bases, mitigating risk while also improving process efficiency.
“The average loss per payment fraud case is $125,000. With fraudsters getting smarter, and new fraud types emerging, prevention is more crucial than ever.”
Corcentric StopFraud™: Your fraud defense force
When it comes to leading experts in comprehensive AP fraud prevention, Corcentric StopFraud is the go-to solution for leading companies across industries. Equipped with advanced AI-driven monitoring, real-time alerts, and customizable controls, StopFraud goes beyond just catching fraud—it stops it before it starts.
Powered by a team of fraud prevention experts leveraging cutting-edge technology, Corcentric StopFraud offers everything you need to protect your accounts payable process from fraudulent activities, ensuring your business’s financial integrity stays rock-solid. And it works beautifully, as this success story illustrates.
Why you need AP fraud experts on your side
Fraud prevention isn’t one-and-done. It’s an ongoing battle that requires the right expertise, the right tools, and the right mindset.
AP fraud experts aren’t just here to catch fraud after the fact. With a well-trained eye on your AP processes, they can detect, investigate, and prevent fraud before it ever becomes a line item. They know the red flags, the schemes, and the latest tricks. More importantly, they bring the technology, strategies, and regular audits that keep your financial operations ironclad.
When it comes to protecting your bottom line, every dollar counts — and the best way to keep those dollars safe is to stop AP fraud dead in its tracks. Get the full story – download our Ultimate guide to AP fraud detection and prevention.