Article

Reducing the Risk of Fraud with P2P Automation

31 January 2022

In this article, we explore ways through which businesses can prevent P2P fraud through automated controls.

Procure to Pay (P2P) is one of the most complex business processes. A typical P2P process spreads over several systems and operations. P2P is also super prone to fraud, inefficiencies, and money leakage. And the reason is simple. For one, the process involves massive cash flow. Essentially, this means that creating visibility into the entire process from vendor selection to final invoice generation and adjusting payments can be challenging.

Procure to Pay (P2P) is one of the most complex business processes. A typical P2P process spreads over several systems and operations. P2P is also super prone to fraud, inefficiencies, and money leakage. And the reason is simple. For one, the process involves massive cash flow.

Essentially, this means that creating visibility into the entire process from vendor selection to final invoice generation and adjusting payments can be challenging.

An Euler Hermes study found out that 70% of companies experienced attempted fraud at least once between 2018 and 2020. Even more worrying, the number of these cases continues to increase, worsening the situation.

In this article, we explore ways through which businesses can prevent P2P fraud through automated controls.

Digitized Supplier Portals

Account receivable teams can use supplier portals to determine the status of an invoice and gather the supplier’s crucial data, such as insurance information, certificates of incorporation, and payments.

Digitizing supplier portals can help validate a supplier before keying in a new record into the master database. Put differently; supplier validation can occur before the payment process with pre-determined automated business rules.

Further, automating supplier portals can come in handy during the entire P2P process by allowing regular inspection of the supplier master database.

What’s more, a robust upfront supplier validation policy can help curtail unscrupulous suppliers or employees acting as suppliers.

Verifying Access

Businesses can leverage system access tools to verify that there are no issues with their ERP systems and, most importantly, that only authorized users can perform defined roles.

System verification tools can prevent fraudulent processing of transactions within the P2P process. For instance, with a verification system in place, an individual cannot fraudulently create a supplier, pay the supplier and void the transaction in the master database.

Also, by verifying access, organizations can prevent employees from different departments from attempting to process unrelated transactions.

For instance, an employee in the accounts receivable may attempt to process fraudulent accounts payable.

Self-Auditing Accounts Payable

By leveraging P2P automation solutions to self-audit AP and AR accounts, an organization can bring much-needed accountability and transparency into P2P processes.

Self-auditing can enable businesses to provide records of transactions while providing proof that legal procedures were followed.

Also, auditing means being able to track employee action and interaction. That way, organizations can ensure that the right person completes tasks as assigned to them. Auditing reduces not only the risk of P2P transactions but also internal threats.

It is important to note that internal actors cause up to 47% of all reported fraudulent activities.

Electronic Invoicing

Electronic invoicing is the foundation of P2P automation because it eliminates manual processes and paper invoices.

More specifically, shifting to e-invoices reduces the risk of mistakes such as:

  • Creating duplicate invoices
  • Paying incorrect amounts
  • Paying the wrong suppliers
  • Paying p-card transactions on invoices

Adopting electronic invoicing also enables the account payable department to focus on other things such as improving the P2P processes, analytics, and controls.

On top of reducing the risk of fraud, e-invoicing in Segregations of Duties (SoD) controls

Automated Reconciliations

P2P automation offers a strategic way to pinpoint irregularities that could lead to or indicate fraud. Automation allows organizations to reconcile and verify information and documents before transacting.

For instance, through automation, a bank can alert the supplier if the details on their invoice don’t match the information on the master database. That way, the accounting department can resolve the problem quickly with the supplier.

Most importantly, the accounts department can find out if the supplier’s details were fraudulently changed. Also, automation enables invoice cross-matching to detect any inconsistencies beforehand.

Creating Cash Flow Indicators and Monitoring Tools

P2P automation can enable organizations to set up measurement tools and indicators that offer real-time cash flow changes, activity variations, and related forecasts.

That way, finance, accounts payable, and procurement managers can detect irregularities that can cause payment delays. Further, the managers can leverage this information to create policies to help restrain fraud.

That said, indicators that can help improve P2P processes include:

  • Purchase requests pending approval against an organization’s budget
  • Percent of order-related invoices
  • Invoice processing time
  • Expenses incurred to process involves
  • Charges and penalties incurred to process invoices

The Bottom Line

Businesses lose millions of dollars to their P2P processes due to unintentional errors, ineffective controls, and misuse of funds.

With overpayment single-handedly costing typical businesses millions of dollars, detecting irregularities before they occur can drive substantial savings.

Unimaze P2P automation solution can enable organizations to improve how they execute business through process optimization, reduce errors and fraud while achieving compliance.

We provide an out-0f-box solution to help businesses mitigate risks in their P2P process.

Get in touch with us if you’re looking for P2P automation software to help you deal with fraud once and for all.

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