Accounts payable risks you should know

When it comes to processing accounts payable invoices, there are some people who are willing to make unethical decisions and find ways to leverage the accounts payable process for personal gains.
Therefore, it is important to identify risks associated with accounts payable so that you can prepare for them in advance and not be misled or incur unnecessary losses in your business.
Fraud certainly comes to mind when considering the risks and there are different ways to do this. Fraud represents an average loss of five percent for most companies, according to the Association of Certified Fraud Examiners. This suggests a global number of 3.7 trillion dollars.
Basically accounts payable fraud happens with an insider controlling the payment and working with an outside vendor to arrange illegal payments to the vendor. This can be through duplicate payments or totally fraudulent payments.
Under the semblance of making legitimate payments to a merchant, a shady vendor is created and paid. With this, the paying agent usually sends the money to the address of a third party or post office box to which they have access.
There are other types of internal fraud that can occur, such as check fraud, in which someone manipulates or stops the payment of a check and the funds are sent to the personal treasury.
It is also common in these situations that repeated payments are made in terms of money and often go unnoticed in terms of approval limits. For example, if the amount of the fraudulent payment were to increase, it could require the approval and intervention of a senior manager or executive within the paying organization to draw attention to the vicious activity.
Therefore, one way to reduce the risk is to create visibility around the people issuing payments, including analysis of payment history, review of amount and date, and frequency and proximity to the approval threshold.
However, not all risks are intentional and incorrect payments can be made to a third-party merchant for a variety of reasons.
For example, is a problem where an invoice is submitted multiple times to accounts payable, depending on how the invoices arrive for processing. While this is an honest mistake, the unfortunate realities of the pain caused by this type of error are palpable.
In other cases, the payment may exceed the amount paid or due to incorrect pricing information received or some other variation, including fluctuations in tax and freight processing.
In a robust accounts payable process which is taking advantage of payment automation, it is possible to query on pre-processed invoices to avoid duplicate or overpayments.
Invoice processors are often under pressure as they struggle with manual data entry and invoice settlement, which is a struggle in and of itself and the additional step of detecting fraud is not always possible.
Also, it is quite possible that if invoices are processed with only data entry, the data entered may result in payment withholding due to human error or negligence. Obviously, this can be dealt with by modern optical character recognition or electronic invoicing methods.
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