[Opinion] Five steps to protect your business from payment fraud

Digital payments fraud is on the rise as consumers flock to digital channels to replace or supplement in-person interactions. This rapid shift to digital, which is providing necessary solutions during a time of crisis, is fuelling a global surge in payments fraud.

And the threat to companies isn’t only coming from the outside; internal fraud in departments responsible for supplier payments is rife, especially with staff working remotely.

Business controls have not kept pace with digital transformation and remote work challenges

“Companies need to beef up their cybersecurity and anti-fraud solutions,’ says Ryan Mer, CEO at eftsure Africa. “While implementing internal controls takes time, it is imperative that strict controls are in place to mitigate opportunistic as well as organised fraudulent activities.”

His company is a Know Your Payee (KYP) platform provider that is trying to help businesses of all sizes hold off this worldwide threat. From advanced digital security to straight-forward invoice numbers, here are five ways to make your Accounts Payable department the best it can be.

1. Always use invoice numbers

Often, simple tools like invoice tracking are very effective. Invoice numbers should be essential for both your accounts team and your suppliers. This not only helps everyone involved to quickly identify which invoices have been paid and which remain outstanding, but it also helps avoid duplicate payments.

Ideally, your team should use the invoice number as reference when making a payment, otherwise suppliers will find it almost impossible to track their incoming payments – and query it with your team or issue duplicate invoices.

Make sure your team follows a system to standardise invoice numbers from different suppliers.

2. Embrace technology

Real talk: even your most trusted team members will make a mistake at some point, they’re only human. This is why you should automate as many manual procedures as you can to minimise human error in your systems.

A KPMG study, commissioned in Australia, showed that Australian businesses vendor data already has 25 percent anomalies in it. A web interface payments system can save a business half an hour every time they add or change a supplier and a minute each you check a single payment. Such savings become incredibly significant over time.

A good web interface saves time and money.

3. Don’t compromise on security

Financial institutions don’t match business names with account numbers, and fraudsters exploit this at every opportunity. It’s essential that your accounts team has measures in place to verify account names with numbers.

And never compromise on security when it comes to your enterprise resource planning (ERP) system. One popular ERP system had to issue a warning earlier this year after there had been 300 successful exploit attempts on its systems in the preceding six months.

Make sure your ERP system is not leaving you exposed to a dangerous security breach.

4. Keep receiving on track

Have electronic record keeping systems in place so that your receiving department can keep track of any physical goods that have been purchased by the organisation – whether large amounts of stock or a small pack of pens for the office.

Then, streamline all communications between accounts payable and receiving – and monitor that this communication remains continuous. If receiving records are logged in your ERP system, it’s a simple case of checking which items were requisitioned according to the purchase order, facilitating three-way matching so that the accounts team knows that an invoice is legitimate and accurate.

Make sure accounts is strategically aligned with procurement and have approvals in place to limit fictitious suppliers.

5. Segregate duties

One of the most important and effective internal controls in accounts payable is to ensure that different people are responsible for completing different components of a task. No single individual should have the responsibility of completing an entire task.

Not segregating duties could compound losses caused by errors, as busy staff members can easily make data entry errors. Segregation of duties will allow your team to identify most errors before a payment is made.

Even more concerning than human error is the risk of internal fraud. Ask any auditor and they’ll tell you that segregating duties is the most effective way to manage the risks associated with both human error and internal fraud.

“Following these easy steps in your Accounts Payable department, will allow for efficiency, streamlined processes and prevent fraud from impacting your bottom line,” concludes Mer.

Read more: [Opinion] Four steps to SME success in 2022

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