The Challenges of Fighting Billing and Payment Fraud
Billing and payment fraud has always been a challenge for businesses. But in recent years, it’s a challenge that has become much more difficult to combat and control.
While compromised business email cost businesses more than $12 billion between October 2013 and May 2018, the COVID-19 pandemic has exacerbated what was already a costly problem. In the first three months of 2020, for example, cases of billing and payment fraud increased by more than 75%.
According to AFP’s 2022 Payment Fraud and Control Survey, 71% of organizations fell victim to payment fraud attacks in 2021. In particular, Accounts Payable (AP) departments have increasingly additionally comes under scrutiny from malicious actors; 58% of organizations said their PA units were targeted by scams.
Keep reading to learn more about invoice and payment fraud and how your business can use automation to overcome this challenge, protect your finances, and keep your trading partners happy.
What is billing and payment fraud?
Billing and payment fraud occurs when a malicious actor tries to defraud an organization by sending fake invoices to a company and trying to trick them into paying the invoices anyway.
In some cases, the fraudster may pose as a legitimate business vendor by impersonating their email address, slightly adjusting payment details on an invoice, and sitting back and crossing their fingers until payment is made. is finally done. In other cases, a legitimate business might decide to inflate their bill (eg, put an extra zero on a $7,500 bill) and hope that payment will go through without anyone noticing.
Unfortunately, businesses often struggle to detect invoice and payment fraud until it’s too late. Often they don’t find out they’ve been the victim of a crime until the legitimate business follows up, wondering why they haven’t received payment yet.
How Can Accounts Payable Automation Protect Your Business Against Fraud?
Although invoice and payment fraud is becoming more common and difficult to detect when processing invoices, all hope is not lost. In fact, by enabling accounts payable automation, you can significantly reduce the likelihood of invoice and payment fraud impacting your operations, if not eliminate it altogether.
With all of that in mind, here are three ways accounts payable automation can help protect your business against invoice and payment fraud:
1. More checks on payments
When you automate accounts payable, you gain significantly more control over payments. Therefore, you can ensure that you know who the supplier is and quickly determine if it is indeed a valid supplier that you are currently doing business with. At the same time, you can also determine if it is a valid invoice and if an approved supplier is not sending you an incorrect invoice.
Additionally, AP automation allows you to set up controls around invoice approval. This, in turn, allows your organization to rest comfortably knowing that approval rules and payment authorization limits on the back-end prevent someone from taking advantage of an indefinite process. Since invoice fraud typically requires actors inside and outside an organization, this can help you prevent dishonest employees from trying to defraud your business.
With endpoint automation, it becomes more difficult for an employee to send a fraudulent payment in the first place, which should help reduce the likelihood of your business falling victim to invoice and payment fraud. .
2. Digital invoice analysis and supplier connectivity
When you automate AP, you establish a secure digital connection with the vendors you rely on to fulfill your mission. This connection makes it easy to see where invoices come from when they are due and if they match approved purchase orders and quoted prices.
In addition to allowing suppliers to securely submit invoices and easily track their status, this digital connection also protects against invoice and payment fraud by preventing dishonest employees from creating fake invoices and uploading them to the system. .
Again, since this type of fraud usually involves an insider, endpoint automation can remove the possibility that such a person could carry out these types of attacks.
3. Increased Payment Visibility
Endpoint automation also gives businesses access to a digital audit trail that helps them determine who did what and when. If an AP service user approves a fraudulent bill payment, they’re going to get caught. All interested stakeholders can read reports showing who initiated payments to a vendor and whether the underlying invoice has ever gone through the formal approval process.
Simply put, Accounts Payable automation gives you complete visibility into all aspects of the invoicing process, including which vendors sent invoices and which employees participated in the approval and payment process. You’ll always know what happened and how it happened, which should make it easier to crack down on fraud.
Fight against invoice and payment fraud with AP Automation
When you’re ready to empower your PA department with automation technology, you should also create protocols outlining what the invoice approval process looks like and ensure your team is trained accordingly. Make sure everyone in the AP department knows what happens when a bill comes in, how to handle it, and how to pay it. Tell them that deviating from these protocols can ultimately lead to them unknowingly paying a fraudulent bill.
With proper training in place and an AP automation platform as the foundation for your bill payment process, your organization can significantly reduce its exposure to potential bill and payment fraud. Plus, you’ll get all the other benefits of Accounts Payable automation, such as happier vendors, a more productive Accounts Payable team, and the ability to take advantage of early payment discounts or hold payment until it is due to improve cash flow.
With invoice and payment fraud on the rise, businesses need to take proactive steps to secure their systems and reduce their proverbial attack surface. By investing in a modern AP automation platform designed for the digital world, those who commit bill and payment fraud will have no choice but to divert their attention from you to someone else. .