The best holistic approach to prevent external and internal payment fraud is the strategy that implements the most agility and risk mitigation options.
Electronic invoicing has continued to develop and adapt for almost 20 years, but still needs to fuse into mainstream B2B relationships. With simple procurement advice, targeted budgeting and smart invoicing, businesses can survive this rough chapter of global business and can build a more successful and safer future in a post-pandemic environment.
As executives continue to navigate business strategy decisions to deal with dramatic changes in supply chains, having proper communication and strong supplier relationships is widely considered a prerequisite when exploring P2P risks. Subpar communication plans, lack of financial invoicing options and poor risk mitigation have all been exposed in this pandemic process, including confidence on policy implementation.
There are several areas of payments fraud that can be immediately addressed by risk management personnel.
Many companies struggle with voids, refunds or adjusting entries made without documentation or formal approval. These accounts payable processing weaknesses impact outlier purchases, which includes sequential increases in purchases from one supplier to another and other vague purchase orders known as blanket purchases.
Other purchasing practices include order splitting, which involves recurring purchases that fall just under review/authorization thresholds to avoid the scrutiny required for larger purchases.
To go along with this manipulative strategy, some predators use shell companies (unfamiliar suppliers) to create faulty delivery patterns and use variations on an approved supplier’s name to expand their authorization. They list multiple suppliers operating under the same address and repeat the use of a one-time-supplier record for the same address. Predators also use after-the-fact purchase orders that have been amended after invoices have been submitted — or they issue invoices with missing, improper PO numbers and verbal POs that leave out key supplier details. All of these fraud practices are difficult for risk managers and CPOs to overcome, but with enhanced technology and automation implementation, there is hope for them to combat large-scale fraud within global supply chains.
How are executives implementing financial technology into everyday strategy for mitigating these risks, schemes and improving thresholds for supply chains? Executives are starting to use electronic payment options like “PO to Invoice” conversions, allowing the buying organization to send a PO electronically to a supplier which then allows the selling organization to convert the PO into an electronic invoice. Business leaders should know that on average, 36% of PO lines change during a PO’s life cycle, but with coronavirus disrupting supply chains, now up to 61% of PO lines change within their life cycle.
Electronic solutions are starting to become more mainstream within business strategies, which includes options like document management systems — used for tracking and storing electronic documents and/or images of paper documents. This eliminates the risk of processing a duplicate invoice, paying an incorrect amount, or paying the invoice to an incorrect supplier.
Automated matching solutions provide an immediate match of the invoice, PO and receipt when using a related AP solution. Executives appreciate automated matching by the way it performs with no human intervention reducing the risk of error, duplicate payments and improper matches. With continuous supply-chain headaches from COVID-19 for buyers, modern technologies like these help businesses endure risk, fraud and difficulties the pandemic.
Executives should be always looking for the best proactive strategies to analyze and organize their spend strategies to cater to revolving marketplaces — especially during the current pandemic. Many companies are now invested in automated workflows with invoices, in which the invoice approval process is completely automated. Linked to a company’s delegation of authority policy, an organization's approval levels are automatically updated when an approval moves to another department with notification. This speeds up the approval process between CFOs/CPOs and suppliers that can keep supply chains moving along.
For financial leaders, the accounts payable process can sometimes be complicated with suppliers. The goal of any accounts payable department is to pay a supplier “once and only once," rather than have a third party or external audit firm identify a control weakness. Many financial leaders have worked with a solution provider to implement a self-auditing assessment process that identifies a possible duplicate payment before the payment is initiated. Duplicate and erroneous payments are prevented before the cash is disbursed improving the company’s working capital and cash flow position.
