Are you worried about invoice fraud? Should you be worried? There are many risks your accounting department can be exposed to so it's essential you understand the dangers.
Let's set the scene: a normal day at XYZ Accountancy where invoices arrive from all their clients for processing. A routine invoice for a non alarming amount makes its way into the scanning/processing pile: an office supplies invoice or an equipment maintenance bill. Nothing to see here. Looks and feels genuine so it gets queued for payment. The invoice gets paid two weeks later without any inkling that the document was a complete fraud.
Invoice fraud is on the rise and a common cause of serious loss for businesses around the world. An Experian study shows that private sector fraud costs the UK economy alone up to £143.6 billion. The main reason fraudulent invoices are true problem? Lack of transparency and control. A lot of companies work with external accountancies to process and manage their accounts. This means the transfer of financial information from site to accountacy HQ is usually done by physically transporting paper from A to B and employing a scanning solution to get the data into a centralised repository. The level of transparency is extremely low and fraudulent practices can easily take place.
Implementing and enforcing a system of internal controls can help prevent invoice fraud and minimise losses. By shining a light on the buying process and making sure controls are in place before an invoice actually makes it in for payment, substantial savings can be achieved.
Here are four top tips to keep you safe from fraud:
1. Get staff onboard
Fraud tends to thrive in an evironment where responsability, accountability and transparency are low or non existent. Training your staff to follow set procedures and straightforward processes on purchasing goods and processing payments will lower your risk. The larger the company, the more complex the work flows will be but it is important to map them out so you can identify issues as soon as they happen. It's also a good idea to digitise processes as soon as possible so that actions throughout the business can be visible straight way.
2. Three Way Match
The process means matching the purchase order with the delivery note/slip to arrive with the delivered goods and the resulting invoice. This means all products ordered were first of all approved before the purchase order went out, all ordered products or services were received, and the quantity and price you are billed for, matches the order. It's a brilliant way to control spend and catch any fraudulent activity before it has the chance to cause real damage.
3. Supplier Control
Placing responsibility for the purchasing of products internally ensures your spend is controlled at every step. By running a purchase order through a path of approvals based on value, supplier and even nominal code, the chance of fraudulent invoices falls dramatically. It also becomes the internal responsibility of the member of staff purchasing items to ensure they are ordering the right thing, at the right price, from the correct supplier. Setting up new vendors is fully controlled by restricting permissions.
4. Supporting Technology
The first three steps are a great way of safeguarding your company against any fraudulent activities. But how do you do it at scale and in the shortest time? Automating and improving processes is a great option, no matter what size the company. Digitising the approval flow and automating three way matching allows suspicious invoices to be automatically flagged for discrepancies or problems. When the process is fully digitised, an audit trail will help highlight a whole host of potential accounts payable fraud.
By implementing strong controls and supporting them through technology, accountancies can monitor and prevent fraud when it comes to managing their clients' finances. The hightened levels of transparency can also boost the value they bring to their clients' operations by producing rich insights and real time financial advice.
Want to know more on the right steps to take when you discover fraud? Download our fraud safety e-book now.