9 Ways to Mitigate Fraud with AP Automation
Tip Sheet
Another day, another way criminals are trying to get their hands on your payment information.
From stealing checks out of the blue USPS boxes to fraudulently requesting a change of address for your vendor, bad actors seem to be getting more creative. And with 63% percent of respondents reporting that their organizations faced fraud activity via checks, a lot of those scams are working. That costs you money—not only in costs related to fraudulent activity, but also in late fees to your vendors.
One way to mitigate fraud within your payments process is by automating your accounts payables processes. Here are nine ways that AP automation can help your organization improve internal controls and deter bad actors.
Internal Controls
1. Implement Tiered and Automated Approval Processes
Automated payments systematize your internal controls, ensuring that every invoice goes through its necessary approval criteria. For example, invoices over a certain amount can be automatically routed to the correct reviewers, ensuring that no payment is made without the required approvals. These strong internal controls help you improve compliance and maintain your reputation in the community.
2. Ensure Segregation of Duties
Remote and hybrid work has made segregation of duties for paper-based payments processes more challenging. Automated systems help maintain the proper separation of duties without requiring everyone to be physically present. No need to drive checks to your CEO’s house to sign, or for someone to come to the office to print checks.
3. Early Warning Systems for Inconsistencies
Mistakes happen, for you and for your vendors. Automated systems flag inconsistencies such as payments that haven’t been deposited within a specific time frame. You can address potential issues proactively, maintaining the integrity of your financial operations.
Protect Sensitive Account Information
4. Custodial Accounts
With AP automation, you create an operating account from which money is pulled to pay invoices. Your custodial account stops the need to share your main account and routing numbers and keeps fraudsters from accessing your primary accounts.
5. Secure Vendor Management
Automated systems streamline vendor management by securely storing and managing vendor information. Your vendor data is handled in line with security best practices, and you reduce the risk of exposing sensitive account details through manual processes.
6. Transition to Digital Payments
Digital payments, such as virtual cards, eliminate checks sitting in mailboxes or on desks. With no paper checks, you reduce the risk of theft. You protect your sensitive account information and that of your vendors.
Accelerate Issue Detection and Mitigation
7. Faster Reconciliation
Automated processes facilitate faster reconciliation by matching payments with open invoices. This helps you identify and address outliers quickly, reducing the time fraud goes undetected.
8. Operational Efficiencies
AP automation handles changing payment data efficiently, which saves time and prevents issues like returned checks and late payments. Your team will spend less time on support calls from suppliers and vendors regarding lost or mis-delivered payments.
9. ACH Validation
Automated payment systems screen transactions for account status, payment/chargeback history, ownership, and information consistency. This reduces ACH return ratios and ensures you are paying the correct vendor, thus mitigating fraud risks. ACH validation is time-consuming and expensive for an individual organization, but most payment automation systems include it in their standard processes.
Ready to learn how to incorporate automated payments into your AP workflows? Check out our other resources on automated payments and Payment Assistant in Blackbaud Financial Edge NXT®
