The Accounts Payable (AP) department is one of the most sensitive in a company’s organisation. Invoice, account and client data are all critical, so keeping them in the trusted hands of trusted staff seems wise. But as Cloud technology continues to be proven safe, AP Automation has become the most effective guard against internal fraud, as well as external.
The reluctance by some to embrace accounts payable automation is understandable. The crucial nature that creating, distributing and tracking invoices accurately has is obvious. So for companies of all sizes, the fear of a ‘glitch’ is not rooted in the inconvenience it might cause, but in the possible financial consequences.
But while advocates will highlight the benefits in speed and efficiency that AP Automation offers by working through the Cloud, it is worth noting that internal fraud is a genuine threat too. In fact, statistics in the UK show that employee fraud is not something to forget about.
According to the 2016 PWC Global Economics Survey, some 55% of UK organisations have reported cases of internal fraud, a figure that is significantly higher than in the US (38%) and China (28%). The report revealed that 60% of economic crime in the UK was committed by external perpetrators, with crime carried out by employees accounting for 31%. And while it represents a fall, it is nonetheless significant.
Perhaps most surprising fact to emerge was that the number of ‘silver fraudsters’ is higher than ever before, with crimes carried out by senior management more than doubling, from 7% to 18%.
Also, the survey found that 45% of internal fraud was carried out by employees who had worked for 5 years or more with their company and 21% for over a decade.
Anti-Fraud Benefits of AP Automation
AP Automation offers the greatest level of transparency and accountability because every payment that is made must go through the system. The result is that, no matter what issues might arise, details of each transaction can be found and the truth be confirmed. For this reason, it is a key part of internal fraud prevention.
An automated system offers 3 key benefits that help the fight against fraud and, as a consequence, keeps your business and your clients’ transactions safe.
Much has been made of the time-saving wonders that AP Automation offers. Traditionally, the system incorporated thousands of paper documents all filed within a complex cross-referenced system. The chances of losing invoices and receipts were pretty high – not to mention the opportunities for internal fraud to rear its head.
With the Cloud, the filing of all relevant documents is made simple but, more importantly, so is recalling the complete lifecycle of an invoice or receipt. So, it makes it easier to identify any unusual activities, who executed a particular action, exactly when and verify if it was due to an honest mistake or something more sinister.
The 2016 PWC Global Economics Survey also showed that 22% of frauds were detected as a result of monitoring suspicious transactions, 14% due to fraud risk management, and 8% each through data analytics and an internal audit.
How AP Automation Helps
AP departments have never been open shops, where anyone can walk in and have a look around. Access has always had to be controlled. The same access control can be provided through AP automation, but because of the advanced security features now synonymous with the Cloud, access can be even more effectively policed. This is because electronic invoicing systems can assign specific responsibilities to specific team members, restricting set functions to only a few.
This systematic segregation of each AP task can also result in greater compliance and accuracy, and with no crossovers permitted, offers a highly effective guard against internal fraud.
How AP Automation Helps
Efficiency is important in an AP department, but has never been easy to achieve. The key culprit was always the volume of paperwork to be processed, and pressure to meet targets in time for the fortnightly report. To deal with both, approvals were sometimes made just to push payments through.
Even in the most clinically run departments, the task of checking each invoice before paying it was a big ask, making the likelihood of missing a discrepancy quite high. With that fact known, employees were more likely to be tempted by fraud.
An automated AP solution allows a company to set its own set of best practices, not only improving workflow but establishing step-by-step measures that must be adhered to. These can include payments requiring multiple approvers before going through, or the introduction of a mandatory pre-approval review process.
And because all rules and processing policies can be inputted, the system will automatically apply them preventing anyone from by-passing them. Any measures can be modified by specific administrators only whenever it might become necessary.
How AP Automation Helps
Visit our Account Payable Automation Solution page and learn how Kefron AP can help your business.