team discussing accounts payable fraud
team discussing accounts payable fraud
AP Automation, Security
May 20, 2024

Protecting Your Bottom Line: Strategies To Prevent Accounts Payable Fraud

by The Ottimate Editorial Team

Accounts payable (AP) fraud is on the rise. In fact, 80 percent of companies reported attempted or actual payment fraud activity in the past year, according to the 2024 AFP Payments Fraud and Control Survey.

AP fraud is any illegal action that leads to fraudulent and unauthorized disbursements from your business’s payment system. And if left unchecked, it can result in significant financial losses. The Association of Certified Fraud Examiners (ACFE) estimates that organizations lose five percent of their revenue to fraud annually with a median loss of $145,000 per case. 

So how can you secure your AP and safeguard your business’s cash flow? Read on to learn about key security measures you can implement to help mitigate the risk of accounts payable fraud.

4 Best Practices for Accounts Payable Security

AP fraud often slips through the cracks, and some cases are left undetected for a full year on average, according to the ACFE’s 2024 Occupational Fraud report. 

While some red flags may indicate potential fraud — like incomplete records, unauthorized purchases, or duplicate payments — the safest and most cost-effective way to avoid potential threats is to strengthen your security controls throughout the end-to-end accounts payable process.

Below are a few best practices for minimizing AP fraud risks and protecting your business from illegal transactions.

4 Best Practices for Keeping Your AP Protected From Fraud:

  1. Replace manual processes with AP automation
  2. Use payment controls to avoid financial loss
  3. Adopt AP tools that follow industry-standard security protocols 
  4. Train employees on identifying and preventing AP fraud

1. Replace Manual Processes with AP Automation

More AP teams are transitioning to a fully automated accounts payable process than ever before. But many remain only partially automated (56 percent), and 82 percent of teams still manually key invoices into their accounting system, according to IFOL’s 2023 Accounts Payable Automation Trends Research Report.

Unfortunately, manual processes make you more vulnerable to fraud and increase the risk of invoice manipulation, unauthorized payments, or collusion between employees and vendors. Non-fraudulent errors are also more common, from simple mistakes like incorrect math to more significant ones like duplicate payments.

Both scenarios can be costly and cause profit leaks in your organization. 

But automating your AP process can help minimize errors and protect your business against potential fraud. With an end-to-end AP automation solution, you can streamline the entire invoice lifecycle, from ingestion to reconciliation, and reduce human intervention. 

The best AP automation tools also include built-in controls — like invoice matching, approval workflows, and secure payment methods — to detect and prevent fraudulent activities while minimizing errors and increasing efficiency. 

Learn how Ottimate’s powerful AP automation AI safeguards your data with internal controls that ensure security, privacy, and transparency for your end-to-end processes.

2. Use Payment Controls to Avoid Financial Loss

Traditional payment methods — like paper checks and ACH transactions — remain vulnerable to attempted or actual fraud. But there are several payment controls that you can use to keep these payments secure, accurate, and authorized:

  • Three-way matching: Cross-reference three documents — invoice, purchase order, and receipt — before a payment is made to detect discrepancies and ensure you’re paying the right vendor the right amount.
  • Approval: Create advanced approval policies that designate specific approvers to authorize transactions based on criteria like payment amount, vendor, and payment type.
  • Automated payments: Streamline the payment process to reduce human intervention — and thus, human error — and improve your visibility into your payment operations.
  • Segregation of duties: Assign your staff to specific roles in the invoice and payment process for better control and visibility.

In addition to these payment controls, updating your payment mix to include more secure payment methods, like virtual cards (vCards), can also help reduce fraud. vCards are randomly generated for specific amounts. And once processed, the vCard number can’t be reused — curbing common risks like data breaches or overspending. 

3. Adopt AP Tools That Follow Industry-Standard Security Protocols 

Data security is a crucial defense against accounts payable fraud. And using tools and software that offer industry-standard security measures — from encrypting sensitive financial data to restricting access to authorized staff only — can help safeguard your AP data.

Here are a few security controls and measures that help protect your data against fraud:

  • Bank-level security: Leverage this form of security used by financial service providers and banks to encrypt and protect your financial data at rest and in transit.
  • Single sign-on (SSO): Allow your staff to log in to multiple applications using one set of credentials, standardizing access and authentication while reducing the opportunity for attacks across the organization.
  • Multi-factor authentication (MFA): Provide an extra layer of security to further validate users beyond usernames and passwords and expand access control. 
  • Role-based permissions: Restrict employee access to specific data or actions to improve control, visibility, and accountability.
  • SOC 2 compliance: Ensure AP software meets AICPA-developed compliance standards to guarantee financial data is stored and processed securely.

It’s also important to make sure all of your AP systems and software are up to date to prevent cyberattacks. Outdated software often contains vulnerabilities or bugs that hackers can exploit to access your system or data.

At Ottimate, we monitor and protect our site against attacks and audit our systems regularly to deliver the latest, most secure software — helping to mitigate risk and reduce the likelihood of data breaches or theft. Our tools also feature bank-grade security, built-in controls (like SSO and MFA), and compliance certifications to enhance security and prevent fraud.

4. Train Employees On Identifying and Preventing AP Fraud

Switching to AP automation, implementing internal controls, and using secure applications aren’t enough to prevent accounts payable fraud. Your staff must also be aware of common AP fraud schemes and the actions they can take to block them.

This includes:

  • Not sharing account credentials with fellow employees or external parties
  • Creating account passwords that are strong, long, and difficult to guess
  • Following all company security protocols and procedures
  • Being vigilant and promptly reporting any suspicious activities

Employees are critical in minimizing fraud and protecting your company against financial loss. And with proper education and training, they can serve as your frontline defense against AP fraud.

Keep Your AP Secure and Protected with Ottimate’s AP Automation AI

Accounts payable is inherently susceptible to fraud, but implementing robust security measures can help guard your company’s data and finances against internal or external threats. Fraudsters are becoming more sophisticated, but companies prioritizing security can stay a few steps ahead to avoid financial loss.

And the good news is that you don’t have to go it alone. 

With Ottimate, you can process invoices and payments automatically with built-in controls and deep-learning capabilities that mitigate risk, minimize errors, and improve accuracy from start to finish. Discover how Ottimate can deliver greater process efficiencies while protecting your AP.

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