Without a doubt technology plays a huge role in preventing accounts payable fraud. Technology and automation take the slack out of manual processing, making it possible for an invoice to be processed in a fraction of the time. Not only does automation increase throughput, but it makes it more difficult for crooks, who rely on inefficient processes, to sneak fraudulent invoices through.

Automated processes can incorporate controls and enable the integration of simple, as well as not-so-simple, verifications during the process. For example, an automated process allows you to incorporate levels of authorized spending limits with individuals submitting/approving invoices for payment. This can be done by title or by the employee’s name. When an unauthorized person tries to approve at a given level, the item in question can be automatically kicked up to the next level of authorizations without any human intervention.

Audit Trails

As many of you who are involved in accounting and controllership functions know, audit trails are crucial. Software built especially for invoice processing and the procure-to-pay function leaves a clearly identifiable audit trail.

Depending on the product selected, it is possible to identify every single person who touches a particular transaction. This includes simply clicking on a link to view a transaction even if the individual did not alter the information or process it. This feature serves as a deterrent to those who sneak around corporate files looking for information that might later be used to defraud the organization.

Online Three-Way Matching

Technology allows automation of the proverbial three-way match (invoices against purchase orders and receiving documents). All invoices that do not have the corresponding documents are kicked out for manual processing. Thus, the automation handles the bulk of the transactions leaving humans to focus their attention on the remaining. This will help highlight fraudulent invoices.

The automation of the three-way match allows for detailed checking that is more difficult in a manual process.

Travel and Entertainment

Although the dollar amounts associated with travel and entertainment fraud are not always the largest, it is the place where employees can ding their employers the easiest if they are so inclined. Automated travel and entertainment policy compliance makes this difficult, if not impossible. Some of the travel and entertainment products have online policy compliance built in.

While the goal of these modules is generally to ensure that employees are complying with the corporate policy, it also helps prevent travel and entertainment (T&E) fraud. It should be noted that many employees who steal from their employers in other ways eventually cannot pass up the temptation to dip into the T&E fund. Many corporate frauds that have gone undetected come to light only after the perpetrator got greedy and tried to expand his or her stealing opportunities to T&E. Automated policy compliance checking is one way to catch this type of activity.

Master Vendor File

The master vendor file is often overlooked. Yet crafty employees who know how to manipulate entries to it can often swindle quite a bit from their employers. One easy way to determine whether this is going on under your watch is to take advantage of technology and run your employees’ addresses against the addresses of your vendors in the master vendor file. If you enter traveling employees as vendors for reimbursement purposes, remember to factor that into the equation.

Since some thieves use their home addresses (yes, even when they are stealing from their employers) this is a relatively easy way to identify potential fraud. Once you have the list of address matches, someone will need to review it and eliminate legitimate entries.

Actual vs. Budget

Many organizations spend a lot of time on the budgeting process and much less on reviewing budget versus actual reports. This is unfortunate, since what matters to the bottom line is the actual spend, not the projected spend. Accounts payable has this information. By working with the data related to actual spend organizations may be able to:

• Negotiate better pricing discounts
  

• Negotiate better payment terms
• Recover pricing discounts that were not taken due to a disjointed ordering process

The information needed for these negotiations lies in accounts payable. Mine the data and get the best deal you can for your organization. This data can be used to negotiate with a few preferred suppliers. In a large decentralized organization, local purchases are often made at prices that are not advantageous to the organization. On rare occasions the local purchasing professional receives kickbacks related to these overpriced transactions. Use of the data to negotiate favorable pricing puts an end to such unethical behavior.

Mary S. Schaeffer is the author of a dozen business books including Controller and CFO’s Guide to Accounts Payable. She serves as the editorial director of Accounts Payable Now & Tomorrow, a payment newsletter and leads that organization’s accounts payable consulting endeavors. She writes a free ezine for professionals interested in payment issues which can be signed up for at www.ap-now.com/ezinesignup.html.