5 Ways to Reduce the Risk of Fraud with Accounts Payable
Accounts payable fraud is a rampant problem that costs businesses billions of dollars each year. The most common type of fraud in accounts payable deals with embezzlement, where the person entrusted with paying vendors is stealing funds. When this happens, it becomes difficult to tell who owes what to whom and whether or not anyone has been paid too much or too little. However, there are ways to reduce the risk of fraud with accounts payable by implementing checks and balances into your system. Some of the ways to improve the quality of your accounts payable functions are below.
1- Accounts Payable Checklists
One way to reduce fraud with accounts payable is to use checklists. While this might seem like an obvious solution, many businesses do not utilize a checklist for their AP department. In the event of a miscommunication with an invoice or payment documentation, you can ensure that your AP department has done its due diligence when it comes to checking invoices against approved purchase orders, budgets, and accounts payable policies.
2- Accounts Payable Audits
A simple checklist can help catch mistakes that may occur when invoices are matched with purchase orders and invoices, thus reducing the risk of fraud. However, it is also necessary to conduct regular audits to ensure that your accounts payable department’s policies and procedures remain consistent. This will help you identify any problems before they get out of hand or end up causing a significant financial loss for your business.
3- Use a Software Solution
Many businesses are turning to automated accounts payable software solutions to help reduce the risk of fraud with their suppliers. For example, companies can use a platform to allow users to quickly and easily conduct business transactions online through an electronic network. Additionally, there are hundreds of different invoice management systems that will help automate daily accounts payable processes. This way, your staff will be able to focus on other revenue-generating functions of the business while still enjoying increased efficiency in paying invoices.
4- Automate Approval Processes
It is important to automate your accounts payable approval processes to reduce the risk of fraud. The more manual steps there are involved in transactions, the greater chance that mistakes could occur. Setting up automated approvals will ensure everyone gets paid on time while also ensuring all necessary documentation has been reviewed before payment is issued. While this may take some time and energy initially, it will pay off in the long run by improving your accounts payable functions and reducing fraud.
5- Verify Your Vendors
One other way to reduce the risk of fraud with accounts payable is by verifying your vendors. One easy way to do this is by using an online directory, which provides information about a business based on public and private records. This helps ensure that you are paying legitimate organizations for their services while also reducing the risk of purchasing fake invoices from scammers. Additionally, it reduces fraudulent activity because if something seems off, then you can investigate further before authorizing payment.
Overall, there are many different ways businesses can reduce the risk of fraud with accounts payable to keep losses low and protect their financial health. By implementing just one or two strategies mentioned above into your accounts payable department’s policies and procedures, you are sure to see an improvement in the efficiency of your business.