09 November 2017 0 Comments Posted By : Administrator

How to Spot Accounts Payable Fraud

Canadian businesses, like organizations around the world, tend to lose a lot of money each year because of fraud, and in most cases, it’s entirely avoidable. One area where fraud often goes under the radar is in the accounts payable department, but it can’t be stopped if it’s not first identified.

The following are some ways to see where AP fraud is occurring, so steps can be made to eliminate it, saving money and improving corporate culture and compliance.

Use the Right AP Software

A big reason AP department fraud is so easily to get by with is because of a lack of visibility and the fact that so many things are done manually. The department also tends to exist in a silo apart from other departments, so there’s not a lot of oversight from outside of accounts payable.

To address these issues and spot fraudulent activity, it’s necessary to have a robust Canadian AP automation software platform. This is going to remove a lot of the potential for fraud, in addition to offering analytics and centralized visibility to get a complete picture of what’s going on.

As an added bonus, when you have good AP automation software, you’re also going to reduce a lot of errors that aren’t the result of fraud but are still affecting your bottom line.

Fully Vet Vendors

Sometimes AP fraud isn’t occurring as the result of something internally, but it’s because of the vendor or supplier. It’s important that the AP department fully vets all suppliers before working with them, and this can take some research.

It’s not uncommon for shell companies to receive payments, but this is something that can also happen internally as well. For example, a bookkeeper could create a fake company and then divert payments to it. It’s just important that thorough vetting is done for all suppliers by a supervisor.

Watch for Duplicates

In many cases, duplicate payments are the result of errors and not fraud, but it’s still important to look for these. Using an AP software system with analytics and visibility will make it easier to spot duplicates, and get to the bottom of why they’re occurring.

It’s estimated that corporations make duplicate payments at a rate of 2% and this can amount to over a million dollars a year for large companies.

Look For Checks That Are Just Below Thresholds

A way to spot fraud in AP is to look for checks that are just below threshold limits. For example, if your AP department knows that a check over the amount of $2,500 is going to be reviewed or is going to be flagged in your system, then they might make it for $2,499.

Anything just below certain thresholds should be scrutinized, as should checks that are rounded amounts without any cents.

Finally, sometimes a big part of watching for AP fraud is about the people. Managers and department heads should keep a close eye on employees because unhappy employees are more likely to be non-compliant or engage in fraudulent activity.

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