Fraud in the accounts payable process is all too common, and companies of all sizes face this problem that costs businesses billions every year. Companies receive and process hundreds of invoices daily, and the volume makes it impossible to inspect each invoice. Invoice fraud involves a variety of scams that can go unnoticed by the AP teams.
According to the 2020 ACFE Report to the Nations, a typical fraud case will last 14 months, causing an average loss of $8,300 per month, and many go years without detection.
Accounts payable fraud targets a company’s accounts payable department, which is responsible for paying suppliers and other vendors. Accounts payable fraud can be committed internally by employees, externally by vendors, the two parties working in concert, or, increasingly, by an outside party looking to gain access to the company’s accounts payable systems.
The most common invoice frauds are invoices with inflated prices (overbilling). Spotting such invoices may seem easy, but it usually isn't. Usually, the invoices are inflated just enough not to raise red flags, with the goal of volume to get as many small amounts as possible. Another common scam involves false vendor invoices (false billing). These are invoices charged for legitimate goods or services that were never delivered. Since the invoices come from vendors the company regularly uses, it is difficult to spot these false invoices. The highest leakage is perhaps from duplicate invoices, where the same invoices are processed and paid for more than once. The 2020 ACFE report found that billing schemes can be costly, causing a median loss of $100,000. Some of the other common types of invoice fraud to watch out for:
- Overpayment: An employee could overpay a vendor and keep the returned balance for themselves.
- Pass-through schemes: A vendor and employee work together in an overbilling, overpayment, false billing, or duplicate invoice scheme. The employee receives a portion of the funds.
- Disguised personal purchases: An employee uses company money to pay for personal expenses.
- Fake vendor: An employee creates a fake vendor account and sends money to themselves.
While many of these scams are difficult to spot, you can put controls in place to help prevent them. The ACFE reports that almost one-third of fraud is attributed to a lack of controls. Inefficient processes and manual data entry remain a top issue related to accounts payable.
Digital technologies like Hyperautomation and AI can address accounts payable fraud concerns, save time, and avoid the risk of human error. The use of automation can help AP teams spot issues in invoices and payments. For example, it's easy to match invoices to payments and detect things like duplicate payments and multiple payees for a single vendor using automated processes. Tackling invoice fraud with AP automation involves verifying invoice information, knowing if the PO is accurate and if the order was received. Automated 2-way, 3-way matching requires the invoice to be matched with the PO and the receipt of the goods. Digital technologies can help AP teams run as efficiently as possible and achieve more in less time and with fewer errors.
Kanverse Account Payable Invoice Automation can help AP teams with end-to-end automation to ingest, extract, validate, approve and file invoices into downstream systems. Kanverse can significantly increase visibility about invoices with its intuitive dashboards. With Kanverse, invoices enter the company's system of records through a standard method and a centralized process making it easier to detect and prevent anomalies. Kanverse AP Invoice Automation comes with out-of-the-box AI technologies that automatically identify discrepancies in invoices and recognize instances of fraud, and notify the appropriate parties. Kanverse also automates the approvals and corrections process by routing the invoice errors to the AP team members.
Accounts payable fraud is hugely damaging to the bottom line. Kanverse AP Invoice Automation can minimize the risk it poses to your business. Contact Kanverse.ai for more details.
About the Author
Kingshuk Ghosh, Product Manager, Kanverse.ai