By FISCAL Technologies
The increase in the frequency, types and cost of invoice fraud (£93M in 2018), puts greater pressure on governance and control as the ‘eyes-on’ approval process is limited to spot checking invoice exceptions. Every organisation we speak to firmly believe that they have the systems and processes in place that ensure they don’t carry any financial risk, that they cannot be tricked into paying a fraudster. But in reality, the challenges, stresses and conflicting priorities of today’s businesses make it easy for fraudsters to gather enough tangible information about their targeted organisation to pose convincingly as their supplier. In some cases, receiving multiple payments before the fraud is discovered or when the legitimate supplier complains about non-payment of invoices. At this point, the recovery and return of funds from the fraudulent account is virtually impossible.
According to Crowe Financial Report, published by the University of Portsmouth, ‘Since 2009, losses owing to fraud have risen by 56.5%’.
Using technology to Reduce the Risk?
Digital Transformation holds one part of the key, offering seamless, touchless order processing and payment transactions, so that the incidents of manual handing errors are removed. However, this can then open up the risk of loss through cybercrime and spoofing, organisations are struggling to keep up with the sophisticated nature of invoice fraud attacks.
In many industries there is an expectation that duplicate payment and credit processing is a standard part of the AP, however this is where fraud and error can hide. Processes and technology are in place, but we all know that over time, controls laps and processes change slightly, especially when there is a high turnover of staff.
Some legacy practices such as simple 2-way or 3-way matching (of purchase orders, invoices, or delivery receipts) can provide some security, but is useless if your organisation processes 100’s of invoices a week and the fraudulent change has been made to the Master Supplier File.
Fighting the battle of payment error
Holding the full set of keys, checking the checker, being able to have the final go/no-go on a payment run really does provide the assurance across the business that the finance controls are robust and delivering value.
We find that our customers see results within days, have the confidence to promote best practice and payment governance.
Our NXG Forensic® solution reviews 100% of a client’s payment transactions prior to payment being made. We continuously identify a multitude of P2P anomalies (supplier file changes, PO errors, duplicate invoices and fraud) that require further investigation. Utilising any ERP system data on a daily basis, our solution provides the results of complex analysis and financial logic in understandable and easy to act upon dashboards, along with the option to validate or rectify anomalies, we also highlight areas to investigate such as fraud risk.
Nobody wants to believe that they are still processing errors, especially after major investment in finance systems. However, no organisation can fully safeguard their profits, unless they continuously monitor their spend.
It’s Time to Boost your Procure-to-Pay Effectiveness
Never before has the impact of regulations and finance compliance been higher and the need for Procure-to-Pay (P2P) best practice never more urgent.
The ability to increase the speed of business transactions is essential for organisations to remain competitive in a tough and fluid economic landscape. Organisations of all sizes and industries find that supplier maintenance AP automation can actually slow or even stall profits due to payment errors for a number of reasons.
We often hear from our customers that the complexity building across P2P further adds to the challenge of protecting their profits from sitting in their supplier’s bank accounts instead of their own. Relying on traditional controls and audits is no longer sufficient, it’s time to adopt a new holistic view of P2P risk management.
But there is light at the end of the tunnel. The dream of identifying payment risks, fraud and compliance breaches, before the payment is made, and stop the errors perpetuating is now reality. Here are our Five Steps to Boost your P2P Effectiveness
1. Fortify your controls with daily self-auditing
The retrospective nature of audits means that corrective action can only be taken after the event. The errors, issues and overpayments have been in place, and building up since your last audit.
Furthermore, most audits only look at a range of values, we find that the majority of your working capital losses won’t be identified until the next audit, which could be 12 months later.
Although automation can speed up the reviewing process, this often leads to fewer people reviewing transactions, and rarely with the responsibility to safeguard company profits, therefore responsibility for protection is left to the audit teams.
Empower your teams to self-audit with actionable insight into transactions. This transforms their role from repetitive checking and correcting to revenue generating and profit saving, by proactively addressing payables errors.
Using NXG Forensics® to detect and alert AP teams to risk within transaction irregularities, our customers find that they eradicate overpayments and the risk of supplier fraud.
2. Supercharge your actionable insight
Systems deployed across the finance function all generate their own set of reports and dashboards, so there are many disparate reports from multiple systems, how can they highlight the most important risks, those specific to P2P?
The paradox is that all this information and data being generated is actually obscuring the view of what matters most when it comes to identifying unknown risks and provides little in the way of actionable insight. This inevitably makes the P2P process more vulnerable to risks.
Finance departments need to be able to find, understand and then act upon irregularities in the P2P transactions they process. When analysed correctly, this data will provide insight into specific risks and any shortfalls in the P2P process for both immediate and long-term benefit.
Continuous monitoring and forensic analysis identify risks from exceptions, providing the specific insight needed to drive process improvements, especially those organisations seeking to reduce strategic risk and operating overheads.
3. Add oversight to your automation
In the rush to automate repetitive P2P processes, organisations are now foregoing much of the control and validation previously achieved with human intervention and are not replacing it with anything else. This coupled with increased reliance on automation systems that don’t manage exceptions well and supplier portals and other changes to the P2P landscape have changed the risk profile.
Giving finance teams the tools needed to continually analyse payments, detect anomalies and act on risks before they have any impact is the most powerful control you can implement, and will radically reduce payment errors and associated costs.
Automation is essential, does not deliver the process oversight, exception handling and actionable intelligences that is used to improve processes and provide efficiency gains. Automation is essential but should not be used as custodian of working capital in isolation.
4. Step-up your fraud prevention
Growing in tandem with the complexity in P2P operations and pressure to reduce costs, fraud is rife across the supply chain. New technologies enable fraudsters to carry out ever more sophisticated scams and automation has removed countless human checks, alongside it, removing opportunities for people to spot anomalies.
Organisations are also battling with overall increased complexity of financial operations, inadequate procedures for maintaining the master supplier file and a global supplier base which can expose gaps in control processes.
Against this backdrop, the absence of a coordinated and comprehensive company-wide fraud strategy leaves organisations dangerously exposed.
The P2P team must become the cornerstone of an organisation’s fraud risk reduction strategy, generating insight from the P2P data that only they hold. This will identify potential fraud all the way up the supply chain.
For example, continuous and proactive master supplier file maintenance is vital to reducing fraud and other payment risks. The key is implementing a standard process that goes beyond periodically deleting inactive suppliers. Procurement and AP need to collaborate and act cohesively on insight found by analysing the P2P cycle as a whole, intelligently identifying highrisk suppliers from actual transaction quality data.
5. Transform your finance team’s skills profile
As the operating budgets of organisations contract and market pressures intensify, the spotlight inevitably turns to internal “overhead” functions to play a more proactive role in an organisation’s success.
Long seen as a cost centre, back-office functions like Accounts Payable, Procure-to-Pay and Shared Service Centres now have to generate increasing value through savings, efficiencies and deeper analysis and interpretation of data – not the traditional skills found in transaction processing teams.
Executives looking to transform the P2P function into a strategic asset can begin by empowering it with the appropriate tools and authority to generate increased value.
With access to best of breed tools, P2P teams can generate the evidence and actionable insights needed to raise performance and benefit the organisation overall. When invested with a level of authority to match their full potential, P2P teams can fulfil their expanded mandate and offer real strategic insight into organisational spending and its impact on working
Through supporting your organisation in these five steps to improved effectiveness, you can take the lead in safeguarding your organisation’s supplier spending, driving efficiencies and supporting strategic objectives.
Using technology to identify and improve P2P effectiveness, our customers review all payments daily, reviewing, approving and dismissing payments from actionable transaction analysis. NXG Forensics® delivers actionable insight into supplier transactions, identifying trends, errors and highlights risk - prior to payment, enabling organisations to detect, alert and
prevent payment errors and possible fraud, protecting your organisation from losing working capital.