How to Prevent A/P Fraud
Accounts payable (A/P) fraud is a common occurrence for businesses in all types of industries. This is no surprise as money flowing out of any organization must go through accounts payable, creating a lucrative place for criminals to commit internal and external fraud. The good news is there are ways you can reduce your risk of A/P fraud. Let’s take a closer look at how.
Know the Signs
There are several signs that may indicate A/P fraud has occurred in your business. Before you can prevent it, you must have an idea of what they are. Several examples of common red flags include:
- Invoices with even-numbered totals, the same addresses as your employees, or those with only P.O. box numbers.
- A vendor master file with many duplicate or inactive suppliers.
- Missing checks as well as checks with suspicious looking signatures.
- Complaints from suppliers about late payments when your records state you’ve already paid them.
Segregate Employee Duties
In a perfect world, all of your employees would be honest individuals and never even think about committing internal fraud. Since this may not be the case, it’s in your best interest to segregate employee duties and ensure everyone knows what they’re responsible for. The employee who issues payments, for example, shouldn’t be the same one who reconciles accounts.
Perform Surprise Audits
To ensure your A/P department is adhering to your procedures and doing their best to prevent fraud, don’t be afraid to conduct surprise adults on a periodic basis. When you do so, point out any weaknesses in their efforts and educate them how to improve. This proactive approach can prevent future issues down the road.
Automate the A/P Process
An A/P automation system can do wonders for your fraud prevention efforts. It may make it easier for you to create audit trails and segregate duties. Most importantly, however, A/P automation may flag any outliers that seem to be fraudulent. You can also use it to convert data into meaningful reports that allow you to see any changes in spend.
Take Advantage of DataShark
Technology Insight’s DataShark tool is ideal for fraud prevention. You can use it to identify suspicious vendor master files, questionable transactions, and a number of other situations that may signify fraud. You’ll be able to detect payment issues early on, before they turn into serious problems and take a toll on your bottom line.