What are you doing to stop Payment Fraud in Invoice to Pay?

Fraud is on the rise globally – As stated in the 2024 AFP® Payments Fraud and Control Survey Report, 80% of organizations were victims of payments fraud attacks or attempts in 2023, which is a 15-percentage point increase over the previous year.

Because the procure-to-pay cycle is the primary route for outgoing cash for any organization, there are a variety of ways fraudsters can exploit the system. These can be split into 3 main categories: 

Procurement fraud encompasses everything from supplier conflict of interest to phantom companies, price manipulation, kickbacks, bid rigging, and vendor collusion. While some of these are theoretically easy enough to detect and prevent with sufficient due diligence, many organizations lack a full picture of their suppliers’ health, creditworthiness, and trustworthiness. A lack of visibility into internal processes also leaves your business vulnerable to internal bad actors. 
 

Accounts payable fraud generally comes in 3 forms:

Fake invoices: requests for payment for fictional goods or services which vary in sophistication from an internal bad actor sending money to a relative via a spurious invoice, or more elaborate schemes involving shell companies with their own bank accounts.  

Check fraud: usually disguised as lost or duplicated checks that result in extra vendor payments being “lost” to external fraudsters or embezzled by someone on the inside. 

Expense reimbursement fraud: where employees exaggerate or falsify expenses for their own gain. 

Payment fraud is any type of fraudulent transaction. These can be related directly to invoice fraud but can also take more exotic forms like business email compromise (where an apparently legitimate email from a senior company official requests an urgent transfer of funds, or spoofed emails from a vendor that often sends payment requests), wire fraud (where money is diverted to a fraudster’s account rather than to a legitimate payee), phishing and vishing attacks which spoof the identity of a senior player at a vendor. 

Many instances of payment fraud across the invoice-to-pay and AP cycles are only ever discovered by chance – long after it’s too late to do anything other than ring your insurance provider. This means fraud prevention must be a proactive endeavour if you’re to avoid losses and unnecessary risk exposure. 

Let’s explore how you can improve compliance and safeguard against fraud across every stage of your invoice-to-pay process. 

Supplier evaluation and management 

Supplier management faces a number of challenges when it comes to fraud protection.

• Companies generally lack trusted information about their suppliers and their financial health. 
• Onboarding processes don’t offer a full enough due diligence stage and take too long to provide actionable information. 
• Managing queries on payment status and invoice status is a full-time job for AP, with many opportunities for fraud to slip through the cracks. 
• Outdated or incorrect master data creates opportunities for social engineering as fraudsters exploit gaps in your teams’ knowledge. 

Tackling these challenges requires full visibility and control over your supplier management processes, and an integrated approach to risk and compliance management. A single dedicated repository for supplier data that keeps up-to-date information on partners, tasks, and documentation helps safeguard against a multitude of fraud types. Robust credit checking processes that go beyond an initial check and provide accurate reports on your suppliers’ business helps close vulnerabilities to phantom company attacks and identify conflicts of interest. And automated workflows for onboarding and reporting help to track performance and automatically flag anomalies for further investigation. 

Accounts payable 
Accounts payable departments that still rely on manual processes for invoice capture, posting, validation, and approval are extremely vulnerable to invoice fraud, as every document must be manually checked. Since your AP team are human, not robots, they’ll struggle to catch every anomaly in time. Fortunately, you can assist them by providing them with AI-powered tools that make visibility and control simple across your entire AP ecosystem. 

Automatic invoice-capturing tools can be used to import information from a variety of different formats and partially validate it against previous instances, making catching potentially fraudulent invoices a part of every step of the process as soon as they reach your inbox. 

Once invoices are captured, ensuring a high automation rate for posting and approval is one of the most effective ways to prevent invoice fraud. An AI-powered system can be given a specific set of business-wide rules to automatically post and process invoices that meet certain standards, while routing those that don’t for automatic review. This means anomalous and potentially fraudulent invoices are always identifiable and always brought to the attention of the relevant people without the need for human eyes to forensically examine every payment request. 

Payment management 
Visibility and control are once again key to identifying and preventing payment fraud. Without the ability to pull through information from underlying invoices, it’s impossible to easily vouch for the accuracy and verisimilitude of the information in a payment file – meaning once payments are geared up for a run, unless you have an integrated system to support your compliance and risk management, you’ll have virtually no granular visibility into what cash is leaving the organization. 

Automated solutions are a key tool here for spotting errors and dubious payments (with reference to their underlying invoices) and flagging these for exception handling (as well as using pre-defined rulesets to flag individual transactions in a payment run for compliance checks). More sophisticated payment tools can also help streamline fraud monitoring processes by extracting potentially fraudulent transactions from a payment run without having to delay the rest of the transactions in the run – letting you continue to do business in a smart and agile manner while ensuring your company is protected. 

How can Serrala help you safeguard against payment fraud? 

Serrala invoice-to-pay solutions all contribute to creating a robust system for fraud detection and prevention: providing a single source of truth for supplier management, accounts payable, and payments alongside a dedicated fraud detection module. All of which provide your teams with the information and the automated workflows they need to stop fraudsters in their tracks. Rule-based checks on every part of the transaction process let you tackle fraud smartly and on your own terms, letting you stay agile and keeping your cash safe. 

Ready to learn more? 

Serrala solutions are designed to create a coherent, end-to-end ecosystem for your invoice-to-pay processes that simplifies your accounting workflows and allows for full working capital optimization. To learn more about how we can help you revolutionize your approach to invoice-to-pay – and how our solutions can streamline and automate every part of the process for greater efficiency, transparency, and decision velocity, check out our resources or book a demo.