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B2B Payment Frauds: Here’s How You Can Control Them

B2B Payment Frauds: Here’s How You Can Control Them
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B2B Payment Frauds: Here’s How You Can Control Them

 

It is estimated that almost 78% of businesses have experienced actual B2B payment frauds last year. This number has been gradually rising since the year 2013 and one of the principal causes behind it is the continuing use of pen and paper-based transactions and the manual process for capturing, approving and paying invoices.

Unremitting use of paper checks in B2B payments has turned out to be more confusing than convenient and secure for businesses. Compared to using automated accounts payable software, paper checks are extremely vulnerable and can lead to external as well as internal B2B payment frauds.

Such kind of fraud is also grabbing attention from IT sectors which have taken clear note of this trend as well. Moreover, many security professionals are still not confident that their organizations have deployed adequate technology to protect against fraudulent activities.

So, if you find your accounts payable team still using the pen and paper method, your whole organization is exposed to an unavoidable level of risk each time it receives, processes, and pays an invoice.

Here, we present a few ways on how your organization can avoid payment fraud with electronic payment processing.

1. Switch to Electronic Payment Methods
Electronic payment options offer more security than paper checks by encrypting the payment data in transit. Virtual Card Technology moves a step ahead, by restricting payment to single time use of credit card number for a fixed transaction amount.

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To enhance security, electronic payment options across the board also accelerate the entire payment method, providing a comprehensive working capital benefit and enhanced command over cash flow.

2. Build a Strong Integration between Accounts Payable and Procurement
Strong integration between procurement and accounts payable ensures goods and services ordered according to the purchasing policy, are received appropriately before paying invoices.

A strong relationship between the two departments allows accounts payable team to understand the entire organization’s purchasing habits and questions the validity of anything suspicious to prevent any kind of fraudulent activity.

3. Track Duplicate Payment Requests
Suppliers may not want to defraud an organization intentionally, but there are few instances when a vendor sends duplicate invoices. For this reason, duplicate payments for the same goods and services are unknowingly made. An effective accounts payable software can check duplicate invoices and ensures that all the duplicate requests are caught.

4. Check Invoice Oddities
When you find invoices are not numbered sequentially, there are skips or gaps, or if there are invoices having the same number then this may indicate that a fake invoice has been generated.

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When an investigation of paper invoices reveals the use of photocopied invoices, correction fluid, or appears to be printed from a laptop, then a further investigation could be needed.

5. Benefits of Automation and Machine Learning
When automation is applied properly, it has the ability to eliminate human error from several steps of your accounts payable process. There may be instances when you do not want your invoices to be fully automated.

But proper automation can minimize costs and make accounts payable more efficient. Take one more step ahead with the help of technology, and research for solutions which integrate machine learning to help your accounts payable run smoothly.

6. Carefully Assign Specific Roles and Authority
Ensure employees do not have more authorization than required to perform duties beyond their role. For example, employees generating invoices should not be able to approve invoices. Instead, invoices should be rooted to the approver, the one with the authority to sign off that the vendor is eligible for payment of goods and services.

Moreover, approver’s authority must be limited to only approval and it should not include performing invoice edits such as modifying vendor master data or altering the supplier on the invoice.

7. Importance of Data to Detect Supplier Invoice Trends
All data-rich companies can identify areas associated with overpayments to suppliers by tracking trends in supplier spend or supplier performance. Data helps your organization detect when something has gone wrong.

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Companies can adopt a more active approach to prevent any kind of duplicate payments by defining parameters to identify and catch potential fake invoices and routing them to someone for review.

 8. Human Factors can be a Major Cause
Unsatisfied employees in the accounts payable department can be one of the major causes for accounts payable fraud. It is important to keep an eye on morale and ensure that their benefits and pay are up-to-date so they feel well taken care of. Stay away from recruiting temporary employees for this job and excessive turnover.

To Sum Up
Fraudulent activities of any kind can deliver an enormous blow to your organization both economically as well as to your reputation. Organizations of any size can fall victim to these tactics.

There must be end-to-end transparency and ability to process every invoice, knowing the complete context is the primary key to avoid fraud. Coordination between receivers, approvers, and accounts payable provided by the vendor acts as a crucial factor to a successful fraud prevention strategy.

 

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