Essential Guide to Accounts Payable (AP) Fraud Prevention in 2023

November 17, 2022

The protection of financial assets and transaction monitoring processes are critical to ensuring financial well-being for any enterprise. The management should enforce strict compliance and protocols to prevent fraud and any malicious activities. Not having rigorous processes in place can lead to a higher chance of accounts payable fraud risks, that can hamper brand reputation and adversely affect financial health. 

Account payable departments often fall prey to fraud. According to this report published by Association of Certified Fraud Examiners (ACFE), enterprises risk losing an estimated 5% of their annual revenue to fraud.  

Enterprises of all sizes are prone to accounts payable fraud risks; recently, Apple - a global technology company, was the victim of accounts payable fraud. In this case, internal employees were the source of fraud, who were responsible for procuring parts from different global vendors. The accused was held responsible for defrauding Apple for over ten years, during which he was engaged in theft, taking kickbacks, and inflating invoice amounts for payments. The cost of his activities led to a total of U.S. $17 million in revenue lost during this period. This blog talks about what enterprises must learn more about accounts payable fraud cases and what steps enterprises must take to reduce the risk of fraud.  

Common types of Accounts Payable (AP) Frauds?  

Billing Schemes 

One of the most common account payable fraud cases is through billing schemes. Internal employees may set up shell companies and route invoices to accounts payable departments - internally, they ensure that the invoice is paid. The entry for goods/ services exchanged is often made in the physical records, but no physical inventory is accounted for. Often internal employees can use the shell company to route goods/ services through legitimate ones but with marked-up prices - while the employee keeps the additional profits. Generating false invoices from dormant suppliers and paying the invoices is also a common fraudulent practice.  

Counterfeit Cheques 

Another common account payable fraud case involves internal staff, where employees steal or forge physical checks and deposit into specific accounts they control by changing the code in the accounting system. Accounts payable teams often do not have the technology or the training to distinguish counterfeit cheques from genuine ones. In addition, the timebound payments processing and approval process make it even more challenging to identify fakes and take necessary actions. 

ACH Fraud 

As ACH becomes a favorable payment processing solution among enterprises, bad actors increasingly target ACH systems through organized cyber-attacks. Phishing is a common way through which ACH systems can be compromised. In addition, hackers' resort to social engineering while targeting ACH payment processing. Business credit cards are also at risk when an employee is not careful about their usage. Opening personal credit card accounts with employer's account information also leads to ACH fraud.  

Kickback schemes 

Kickback schemes are also a widespread fraudulent practice, where a supplier works with the accounts payable clerk and deliberately inflates the invoice amount, while the accounts payable clerk at the company ensures that the amount gets paid and splits the additional amount.  

Overpayment / Multiple Payments 

Instances where a supplier introduces additional line items for goods/services not accounted for - to deliberately increase the invoice amount. There could also be scenarios where the tax amount is miscalculated on purpose. Manual driven accounts payable processes witness an increase in errors with a surge in invoice volumes, as it becomes incredibly challenging to reconcile every invoice effectively, resulting in overpayment. There are also scenarios where the same invoice is paid multiple times - it can be a genuine mistake or done on purpose with malicious intentions. However, it negatively hurts the company's interests. 

How enterprises can prevent Accounts Payable (AP) Frauds. 

The best possible solution for accounts payable fraud prevention and exercising controls is by digitizing the entire process with AI (Artificial Intelligence) and automation technologies. Automation helps with invoice processing and, as a result, it reconciles invoices without any bias.  

Automation eliminates the chances of fraud by removing human interaction across vulnerable areas across the invoice processing workflow. Matching invoices and payments, identifying duplicate payments, and multiple payees for a single vendor become seamless with automation. Additionally, the combination of automation and AI opens numerous use cases to detect and prevent accounts payable Fraud. 

Learn more about the role of AI in accounts payable automation. The E-Book talks about the difficult challenges solved by Artificial Intelligence (AI) technology enterprises should be mindful of before considering automating invoice processing. 

Building Vendor match Capability 

Accounts payable departments frequently encounter invoices from phony companies; detecting such invoices and flagging them from the system is essential. Detection is performed through fuzzy matching technology - where the accounts payable invoice automation system scans multiple repositories and vendor databases to detect fakes. In addition, AI-powered intelligence detects and flags invoices when a change in amount is recognized - with high accuracy. 

Automated invoice review powered by AI 

Invoice reconciliation is critical for the smooth functioning of the accounts payable process, and reconciliation activities are the source of multiple accounts payable frauds. There are various steps to reconcile an invoice - Performing 2way and 3way matching with the purchase order, reviewing line-item details, and checking quantity, calculating tax, reviewing receipts to ensure delivery of goods/services, clearing the invoice for payment, and multiple more. AI-powered automation sits at the heart of invoice reconciliation, which performs all the tasks with 100% accuracy and no situational bias. 

Automated payment approval workflow 

A manual approval process is time-consuming and ineffective. However, with technology, building a nested payment approval architecture for invoices strengthens security. In addition, it ensures that invoices are approved for payments from multiple stakeholders based on the organization hierarchy, which boosts compliance. 

PII (Personally Identifiable Information) data protection 

Digitizing invoice processing opens the opportunity to redact sensitive invoices from staff members processing the invoices. As a result, the company's vendor information remains confidential and secured. Redacting contact and personal information can also boost security and make the accounts payable process resilient to fraudulent attempts.  

Digital Solutions to Enforce Compliance  

Invoice processing, when performed digitally, exponentially reduces the risks of fraud. Every action performed by every member is stored with a specific time stamp - which can be later analyzed during system audits. Digitizing also simplifies the audit process and makes it fast and effective – making arrangements to record accounts payable frauds. 

Automated reports help to understand system and process health, along with monitoring protocols that actively guard the system against malicious intentions – with dedicated account payable fraud analytics dashboards. Administrators are alerted in real-time when hostile or unsolicited activity is detected across the system. 

Learn more about how enterprises can scale Account Payable workflows with automation and AI. 


Empowering Security: Streamlining Invoice Automation Workflows

The invoice automation workflow, fortified by AI and automation, curtails accounts payable fraud risks by eliminating human vulnerabilities, enabling accurate reconciliation, secure payment approvals, and safeguarding sensitive data through digitization and compliance enforcement.


Kanverse brings you the best-in-class IDP (Intelligent Document Processing) software to automate submission intake process for Insurers right from ingestion, classification, extraction, validation to filing. Extract data from a wide gamut of documents with up to 99.5% accuracy using its multi-stage AI engine. Say goodbye to manual entry, reduce cycle time to seconds, optimize cost by up to 80%, minimize human error, and turbocharge productivity of your team. 

Schedule a demo with us today to find out more. 

About the Author 

Aritro Chatterjee, Product Marketing, 

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