How AP automation can reduce fraud risk

Guest comment by Karim Ben-Jaafar

In 2021, a staggering 64 per cent of UK companies fell victim to some kind of fraud.

The 8 per cent increase from the previous year can be partly explained by the growing threat of cybercrime, but also by the lack of evolving technologies to mitigate the risk of fraud.

Being caught out by an accounting or finance scam is easier than you might expect. Here are some recent examples from UK businesses to explain why, and some tips on how you can reduce your risk.

Siphoning Funds:  A court case in Cardiff found that a finance officer managed to siphon more than £1.3 million away from a family-owned engineering business. The finance employee ran the company’s bookkeeping, including manually generating and processing invoices. It was discovered they had been creating fraudulent invoices by duplicating legitimate ones and changing the bank details.

Alert: criminals have many routes to fraud

She was caught out after leaving the company when a different employee reviewed the month’s invoices. There was an outstanding invoice of more than £4,000 for a company that later recealed it knew nothing about an outstanding payment.

Bogus Paperwork: In 2022, an accountant from London was jailed for two-and-a-half years for making fraudulent VAT repayment claims which totalled £160,000. The accountancy practice generated numerous fake VAT repayment forms for family members’ businesses for over a year. HMRC caught up with the fraudulent activities and withheld remaining funds before the culprit could collect the total amount.

Company Credit Card: In 2022, a Swansea-based office manager was found guilty of fraud and theft after stealing more than £63,000 from their employer. The office manager used the company credit card to pay for everyday shopping, including petrol and takeaways, over seven years. It took so long for the crime to be uncovered as this employee was the only one in charge of the AP process and was often left alone in the office with access to the company credit card and bank account.

Cardinal sin: Last summer, the Vatican accused ten individuals, including a cardinal, of financial crimes, including fraud, forgery, embezzlement, and abuse of office. The cardinal allegedly used charity money from the Vatican to benefit his brothers’ businesses, which it is believed he was able to do as he was in charge of donations at the secretariat which handles the Vatican funds. This includes an investment in the fossil fuel industry in Angola, as well as the wrongful purchase and sale of a “grossly overestimated” property in London, UK. Businesses can avoid similar situations by creating a detailed approval matrix thus preventing unauthorized transactions.

Manual invoicing is almost the perfect environment for fraud. As demonstrated in the example above, having one person managing a company’s accounts provides an opportunity for invoice duplication. It’s surprisingly easy to push through fake invoices when you’re the one in control of a company’s AP processes.

AP automation would greatly reduce the risk of a single person being able to steal money and siphon funds because of the security measures in place for just this purpose

AP automation solutions, such as that offered by Beanworks, are built to reduce AP fraud. There are plenty of ways it helps, such as:

Document Matching: AP automation includes automatic document matching to link invoices and vendor information. Doing so means, provided invoices are processed through its system, it’s impossible to generate duplicate or fake documents.

Approval Chains: Approving invoices necessary for manual and automatic AP processes. However, when done manually, it’s possible to slip duplicate invoices through the approval chain if you know what you’re doing.

Using an automated AP solution allows your business to set up a detailed approval chain for all those involved. The system then notifies different stakeholders, allowing them to log in and review transactions. Storing details on a single platform, and providing access to everyone involved, helps reduce fraud.

Importantly, approval chains and document matching help to increase security throughout the AP process. In the cases mentioned above, AP automation would greatly reduce the risk of a single person being able to steal money and siphon funds because of the security measures in place for just this purpose.

Automating the entire AP process means faster data entry and increased visibility. Fraud relies on deception and withholding valuable information, which is much harder on a centralised automatic platform. Although automated AP solutions don’t make fraud impossible, they certainly reduce the risk of it happening to your business.

Sponsored: If you are interested in learning more about how automation could benefit your finance department and want to discuss your current accounts payable processes with experts, contact Quadient AP by Beanworks. Quadient AP by Beanworks is the leader in accounts payable automation, helping you empower your accounting team by reducing data entry and approval follow-ups.

Karim Ben-Jaafar is Senior Vice President of Commercial Sales at Quadient