Preventing fraud in Accounts Payable – how technology can help - Part 2

Last week we discussed how automating Invoice checking and verification, automating Expense Management, removing manual touch points and improving visibility of finances and transactions can help to prevent fraud in Accounts Payable. This week we continue to look at technology that can help.

5.?????Profit Recovery Audit

6.????Easier statement reconciliation

7.?????Audit trails and secure storage

5. PROFIT RECOVERY AUDIT

A Profit Recovery Audit is an independent, comprehensive review of a business’s transactions over the last 6 years and ensures that only intended payments are made to suppliers. No matter how good your ERP or preventative software is, a PR Audit will always find errors in payments, 100% of the time.

It’s estimated that just 0.02% of accounts payable transactions are made incorrectly, due to human error. It might sound like a small margin but given the sheer volume of invoices AP teams process day in day out, over a number of years, this 0.02% error rate can lead to sizeable amounts of financial leakage.

When a payment error is found, the PR audit company will recover the money on your behalf, usually in the form of a credit note. You pay a percentage of any monies recovered, so if there is no recovery, there is no fee!

In addition to recovering money, upon the successful completion of the Profit Recovery, you’ll receive a full analysis of the types of errors that have been made and how these can be prevented in the future. This allows your AP team to improve their processes and tighten controls going forward.

6. EASIER STATEMENT RECONCILIATION

Before month-end, the accounts team must reconcile supplier statements to ensure that everything balances, and the books are correct.

Reconciliation is an accounting process that compares two sets of records to check that figures are correct and in agreement. Reconciliation also confirms that accounts in the general ledger are consistent, accurate, and complete.

Account reconciliation is particularly useful for explaining the difference between two financial records or account balances. Some differences may be acceptable because of the timing of payments and deposits. Unexplained or mysterious discrepancies, however, may warn of fraud. 1

Trying to reconcile statements manually is a time-consuming, confusing and lengthy process for AP teams, who potentially have to deal with hundreds of line items that are on SOA. According to a survey by EY, up to 59% of a financial department’s resources are spent on managing transaction-intensive processes. And around 95% of this time is spent checking transactions that already match, instead of dealing with the problem entries that require attention impacting the team’s efficiency.2 Supplier enquiries surrounding invoice payments are a regular occurrence and the lack of good communication and transparency between AP & AR, can often lead to a breakdown in communication between the customer and the supplier, leading to late or no payment of invoices.

Statement Reconciliation software that fully automates the supplier statement reconciliation process is a game changer allowing AP teams to massively increase their ability to do more statement reconciliations in less time. Any discrepancies are highlighted in an online dashboard. This ensures that overpayments, incorrect payments, missing items, unclaimed credit notes, and credit notes posted as invoices are quickly highlighted and resolved, creating an efficient process from start to finish. AP teams can resolve exceptions in advance, pay more suppliers on time, and achieve 100% Monthly Reconciliation.

By having this system and controls in place, working capital is protected and cashflow is optimised. AP teams can drive adherence to the Prompt Payment code, strengthening supplier relationships and protecting your supply chain. The software also provides a full Audit trail for internal and external Auditors.

7. AUDIT TRAILS AND SECURE STORAGE

Integrating an automated solution with a Document Management system (as well as your in-house finance system) to securely store a copy of all invoices, delivery notes, POs, expense receipt images etc, will add another layer of protection to your financial activities. A Document Management system has excellent search functions and all related finance documents (orders, invoices, receipts etc) can be stored with full metadata to aid searching and linking – useful for day-to-day work, essential during an audit. This allows you to gain faster access to data and makes it much harder for documents to be lost or misfiled.

A Document Management system also creates an audit trail so that you can see who has performed an action to what document, which is one way you can monitor what your employees are doing. The system will let you create different permissions for different users so that your team can only access the documents that they need to. All of which helps to improve compliance with industry regulations.

Relying on manual processes leaves your business vulnerable to the risk of fraud, loss of revenue and damage to your reputation. With the right controls and technology in place, businesses can be much better at detecting and preventing fraud in addition to a host of other benefits including improved accuracy and efficiency, improved compliance, paying invoices and expense claims faster, improving supplier relationships and securing prompt payment discounts. With incidents of reported fraud on the rise, can you afford not to take this seriously and equip your team with the tools and knowledge they need to protect your finances and give you peace of mind?

If you would like to find out more about the technology we’ve discussed in this newsletter, get in touch with Jack Wright, Sales Director at YourDMS. Call 01285 810606 or email [email protected].

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Sources: 1 Investopedia.com, 2 EY.com

What people think being emotional means vs What it really means

? LIZ AND MOLLIE?

A reminder for anyone who needs it from Liz and Mollie.

Some people think being emotional means that you are irrational, weak, and unprofessional. But what being emotional really means is that you are human. We don’t always know what other people are going through. We all have good days and bad days. The best thing we can do is be kind to others and ourselves.

For more of these brilliant illustrations and observations, follow Liz and Mollie on Instagram.

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