Next-Gen AP Automation

Deep Dive: How Automation Helps Thwart Internal and External AP Fraud

Accounts payable (AP) fraud is a major threat to businesses, with 82 percent of approximately 600 corporate treasury and financial employee respondents reporting their companies were subject to payments fraud attempts in 2018. Forty-three percent said their organizations lost money as a direct result of such attacks.

These schemes can play out in several ways. Fraudsters might send emails to company employees, claiming to be senior executives and instructing staff to move money into illegitimate bank accounts — 81 percent of surveyed organizations said they witnessed such attacks in 2018.

Not all scams are launched externally, however, as employees can also orchestrate such schemes. This was the case for more than one-third of payment fraud instances reported in a 2018 survey. Dishonest AP department staff could authorize higher-than-normal payments and siphon off the extra funds for their uses, for example.

Better oversight of AP processes can alert organizations to such threats. Businesses are looking to better standardize their processes and adopt software supports and access restriction solutions to give them more control over — and understanding of — their AP departments. This month’s Deep Dive examines how automation tools can help AP departments better detect and thwart attempted fraud.

Automating For Better Workflow Oversight

Fraud schemes that fly under the radar for prolonged periods can blindside companies with financial losses. A report published in 2018 found that businesses’ workers were able to perpetuate fraud for an average of 16 months. Outside scams also cause sizable damages. AP departments looking to catch these schemes must institute better oversight measures.

Businesses that rely on many different employees and offices, with some invoices being processed in one location and other invoices processed elsewhere, may find monitoring fund transfers to be difficult. Disunified policies across different offices can create opportunities for abnormal activity to go undetected. Clearer oversight, invoice tracking and payments issuing processes can ease such challenges, however, and many businesses are turning to automated AP systems for help.

These solutions provide a single platform through which invoices are entered and paid, and the transaction details are recorded and available for managers to review. This enables businesses to more precisely monitor their AP activities and access the data necessary to find and thwart misconduct. These systems allow records to be examined, can trace fraud back to its origin and send alerts about unusual activities, such as higher-than-normal supplier bills or changes in payees’ details. These informational changes could be legitimate, but they may indicate fraud. Single platform systems can also support efforts to create standardized approaches to handling AP tasks, making it easier for companies to notice abnormal processes and catch manual mistakes.

Controlling AP System Access

Businesses seeking to reduce the number of different offices and employees involved in AP processes should not take consolidation efforts so far that they hand all AP approval responsibilities to one individual. Doing so would enable that individual to easily send company funds to whomever they wish without anyone knowing.

Companies can balance security and streamlined processes by employing approaches several higher-up employees must approve, and automated systems can simplify coordination among these staff members. Employees can be given accounts for the AP software, which can configure users’ permissions based on the types of access and approvals they should have. This ensures that only select staff members can sign off on payments.

AP employees’ accounts will also have to be secured against external fraud as criminals with access to workers’ login details will be able to redirect company funds. Businesses can implement secure login processes with MFA, which puts more barriers in place and prevents fraudsters from gaining control. MFA requires users to provide at least two pieces of evidence to confirm their identities, such as login credentials and codes that have been texted to their phones.

Rising Adoption

Payments automation solutions are drawing attention and wider adoption, especially among companies with $1 billion or more in annual revenue. A 2019 PYMNTS study of 400 businesses found that more than 60 percent of such companies were planning to adopt business-to-business (B2B) payments automation measures during the next 12 months. Businesses with smaller revenues were less likely to have the resources to make upgrades, with just 21 percent of medium-sized companies working to implement some automation and only 31 percent already having such measures in place. The most commonly cited payments upgrade that businesses planned to make was AP automation, with one-third of respondents intending to implement such solutions within a year.

Businesses are automating parts of their AP workflows for a variety of reasons, including to make operations more convenient and secure. Companies that cannot keep fraudsters from accessing their resources will be hard-pressed to invest in these systems to salvage the damage and move forward. Businesses must also be able to clearly detect and catch false payment claims so that they do not mistakenly reject genuine invoices from suppliers and damage valuable relationships. Foiling AP fraud may be tricky, but automation systems can bring payments security to the next level.

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NEW PYMNTS DATA: HOW WE SHOP – SEPTEMBER 2020 

The How We Shop Report, a PYMNTS collaboration with PayPal, aims to understand how consumers of all ages and incomes are shifting to shopping and paying online in the midst of the COVID-19 pandemic. Our research builds on a series of studies conducted since March, surveying more than 16,000 consumers on how their shopping habits and payments preferences are changing as the crisis continues. This report focuses on our latest survey of 2,163 respondents and examines how their increased appetite for online commerce and digital touchless methods, such as QR codes, contactless cards and digital wallets, is poised to shape the post-pandemic economy.

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