How an ePayables Solution Reduces the Risk of Payment Fraud

ARTICLE - Is how your business pays its suppliers creating a more significant risk of payment fraud?

If law enforcement organizations and your peers are to be believed, the answer is, “Yes!”

Interpol, the Federal Bureau of Investigation, and State Attorneys General warn that the way most accounts payable (AP) departments operate these days has increased their risk of payment fraud.

Finance leaders recognize the risk. Sixty-five percent (65%) of finance leaders believe the pandemic has contributed to an increase in payment fraud risk, the Association for Finance Professionals (AFP) reports. Fifty-eight percent (58%) of AP leaders believe their organization’s risk of payment fraud has grown since the start of the pandemic, the Institute of Finance and Management (IOFM) finds. One-in-five (20%) AP leaders believe their organization’s risk of payment fraud is “significantly” higher. The increased risk of payment fraud is the biggest concern that AP leaders have about how their department operates. The shift to remote working disrupted proven policies and procedures for how businesses onboard suppliers, process invoices, and pay suppliers.

Forty percent (40%) of AP departments have had multiple fraud attacks in the past year, IOFM says.

Check, and wire transfers always were susceptible to payment fraud. But more fraud is shifting to Automated Clearing House (ACH) transactions as fraudsters become more sophisticated with their schemes. More businesses are falling prey to Business Email Compromise (BEC) attacks where fraudsters impersonate legitimate suppliers or senior finance executives within a buying organization and use email to trick AP pros into making a payment to a bank account controlled by the fraudster.

AFP reports that one-third of businesses have lost money from one of these email schemes.

Weaknesses in the AP process are leaving many businesses vulnerable to payment fraud.

More businesses rely on email to onboard suppliers and route invoices and payments for approval. The problem is that email is not secure. Data sent via email is typically not encrypted. Email does not enforce the separation of duties. Email cannot ensure chain of custody. Emails can easily be misrouted and fall into the wrong hands. Email does not track actions taken on an invoice or payment approval. AP pros cannot see the status of approval sent via email. And nothing is stopping an email from being deleted ahead of an organization’s retention schedule.

Much sensitive information can be pushed around unencrypted while onboarding a supplier and getting approvals on an invoice and a payment. And a lot of that information might pass through and reside on the unsecured device of an employee working remotely or on the go.

Reduce the risk of fraud with ePayables

ePayables solutions natively built in a legacy enterprise resource planning (ERP) application provide the control and visibility businesses need to mitigate their risk of payment fraud.

It all starts with using permissions built into the ERP. ePayables solutions automatically enforce the separation of duties and any other business rules. Authorized AP professionals select the invoices they want to pay and the credits they wish to use from directly within the ERP. The ePayables solution generates a bank file containing all approved supplier payments. The AP professional then securely uploads the file to their bank using Secure File Transfer Protocol (SFTP). Unlike email, there is no chance of an SFTP file falling into the wrong hands.

Furthermore, digital signatures, email authentication, and file encryption safeguard transmitted information. A supplier payment is then created and attached to the supplier bill in the ERP for tracking. Payments can be made using virtual cards, resulting in far less fraud than paper checks. As payments are settled, they are reconciled in real-time in the ERP application, so AP staff can instantly identify any anomalies.

ePayables solutions also safeguard sensitive information by enabling suppliers to submit sensitive data such as bank account details via an online portal rather than passing it through an unsecured email.

Automating supplier payments with an ePayables solution mitigates the risk of payment fraud and offers businesses of all sizes a more common-sense approach to securing sensitive information.

If your organization wants to mitigate its risks, iCloudAuthority wants to speak with you.

Click here to arrange a time to chat about your needs with one of our AP automation experts.