Fraud has been a thorn in the side of B2B business transactions as long as those transactions have existed. With more advanced technology at their disposal, illegitimate parties’ payment fraud attempts become more elaborate. According to the Association of Finance Professionals, last year saw the highest percentage of businesses impacted by payment fraud in the last decade. Here are a few of the payment control best practices your business can put into action today to combat fraud.
Photo: Association for Finance Professionals
IT And Security Professionals On Payment Control Best Practices
The rising instance of payment fraud has It and security staff concerned. As many as 85% of security professionals surveyed responded that their companies lacked the necessary security and infrastructure to combat payments fraud.
The biggest windows of opportunity for fraud reside in the Accounts Payable (AP) department of a business. Errors made during the process of manual data entry and inefficient email communication concerning dozens of invoices at any given time are just two examples of significant vulnerability. However, a majority of fraud cases result from the most insecure payment method accepted by businesses — paper checks.
Why You Need To Implement Payment Control Best Practices
While most businesses are aware of fraud and do implement some steps to mitigate its effects, few are willing or capable of giving the subject the undivided attention it requires.
Common activities businesses use to combat fraud include:
- Reconciling validity against invoices, department heads, and their vendors
- manual comparison of invoices to purchase orders
- compiling checks over time to have the CFO sign off at a later date
These activities may be sufficient to insulate Accounts Payable, in theory. However, with an increase in volume as a company grows, these methods fall short of providing the security AP needs. If Outlook is where your invoice approval process resides, chances are a few of those invoices are getting lost in the shuffle. Bottlenecks emerge when it comes time to audit or get approval through a CFO, who may have only a small window of availability.
Payment Control Best Practices To Mitigate Risk
Despite the growing prevalence of fraud in B2B transactions, here are some payment control best practices you can put into place today to insulate your company from the associated risks.
1. Ditch the paper in favor of electronic payment methods
Electronic transaction support can deliver a lot of benefits to businesses of any size. not only are they convenient, secure, and efficient, these types of payments add multiple layers of security through encryption. Virtual cards take things further with the inclusion of tokenization, a process by which data is assigned a series of symbols that retain essential information without compromising security.
Beyond security, electronic payment methods expedite the payment process significantly. These more opportunities reduce liabilities and increase working capital benefits that your business can leverage. the convenience of electronic payment methods can be felt on the other side of the transaction, as well. customers and vendors that can leverage an easy-to-use payment system in conjunction with your business will feel greater satisfaction from your B2B relationship. Increased partner satisfaction results in stronger relationships and can lead to more referrals for your business.
2. Remove Autonomy Over The Payments Process
Accounts payable are no exception to the rule when it comes to checks and balances. It is never a good idea to give a sole individual complete control of the flow of money in and out of company accounts. Breaking up the process to include several staff members ensures that no single person is responsible for the flow of capital. Designating one team member to set up payments and another to approve and release those payments ensures proper checks and balances during the process.
3. Automate Accounts Payable
Automation isn’t just a buzzword when it comes to your accounts payable department. with volumes of data to be received, recorded, and processed, there is plenty of room for error when the tasks are carried out manually.
Fortunately, modern tools and solutions that can be leveraged alongside your ERP system exist. The automation of these tasks increases security, efficiency, and the benefits your company can leverage as a result. putting manual data entry errors and headaches aside, how easy is it for your accounting department to keep up with rapidly changing rates, rules, and laws? automated software that integrates with ERP delivers that real-time visibility you need to remove mistakes from the equation.
An automated accounts payable process embeds payment controls — like the aforementioned segregation of duties — into the AP process and establishes them as simple and repeatable processes:
Segregation of duties: AP automation solutions designate separate roles in the accounts payable process by creating separate login credentials and separate dashboards. Not only does this make it incredibly challenging to forge approvals, but it also preserves receipt of all approvals in one central location for easy access at any time.
Two-factor authentication: adopting an AP automation solution that requires dual-factor authentication will decrease the probability of an account becoming compromised. the process dictates that a password and text message-delivered verification code must be entered before access to the system is granted.
Auto AP three-way match: For businesses working with purchase orders, AP automation can take the pain out of matching them to corresponding invoices by doing it automatically and flagging any that are mismatched within your ERP system. The “three-way” part of the three-way match refers to the three documents that will be compared:
- The vendor’s invoice that was received will become part of an organization’s accounts payable when it is approved
- The purchase order that was prepared by the organization
- The receiving report that was prepared by the organization
With these controls in place, it’s much easier to protect and sustain your AP process, even as you continue adding vendors every month. The results are felt in:
- Improved compliance and supplier relationships
- Simplified vendor setup and management
- Improved visibility, insight, and control of the entire accounts payable (AP) process
- Ability to focus your AP team on higher-value work
When automation is factored into the equation, the benefits are felt even further with:
- Reduced cost per invoice (CPI)
- Instant storing, securing, and cataloging of electronic documents
- Streamlined AP workflow processes
- Dramatically reduced paper and storage expenses
- Improved cash flow with fewer data entry errors and early pay discounts
- The ability to work anywhere, anytime, on any device
We Can Help With AP Automation And Payment Control Best Practices
For more information on how to implement these best practices and automate AP for your business, get in contact with the experts at Encompass Solutions.
About Encompass Solutions
Encompass Solutions is a business and software consulting firm that specializes in ERP systems, EDI, and Managed Services support for Manufacturers and Distributors. Serving small and medium-sized businesses since 2001, Encompass modernizes operations and automates processes for hundreds of customers across the globe. Whether undertaking full-scale implementation, integration, and renovation of existing systems, Encompass provides a specialized approach to every client’s needs. By identifying customer requirements and addressing them with the right solutions, we ensure our clients are equipped to match the pace of the Industry.
