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In a recent webinar, Matthew Tillman, CEO of OpenEnvoy, and Jose Sorondo, Director of Global Financial Shared Services at Lululemon, connected to discuss accounts payable fraud.
According to the latest 2022 AFP Payments Fraud and Control Survey, 71% of organizations were victims of payments fraud attempts in 2021. The survey also found that Accounts Payable (AP) departments were most susceptible to fraud, as 58% of respondents reported that their AP department was targeted by scammers last year.
Many attacks prey on accounts payable due to a lack of integration and visibility across teams. Scammers are constantly evolving, and businesses must bolster their controls to fight fraud attempts. Validating invoices and payment requests in real-time is critical to identifying erroneous invoices and preventing fraud loss.
In this webinar, these finance experts discuss the latest strategies for eliminating payables risk and saving billions. Let’s look at some highlights from the conversation.
What are the red flags of AP fraud? What is the cost of AP fraud?
Jose Sorondo: In the 3 or 4 fraud cases that I have experienced in the last 6 years, it was the same. The vendor's email address had been compromised by hackers. Then those hackers contacted our company to make banking changes. In those cases, we misidentified that the requests were coming from a fraud case, updated the bank information, and pushed payment to the fraudster.
Matthew Tillman: At OpenEnvoy we see businesses affected who have historically heavy manual processes around fraud. We view it as two types of fraud: intentional and unintentional. Intentional fraud is when someone maliciously attacks using an email from a third party. Those are quite common. We've seen numbers that are 8-figures in size and we have seen massive email fraud scams taking place like that.
Jose Sorondo: After the fraud cases, we needed additional enhanced controls which resulted in one additional full-time equivalent (FTE). We are global in 20-something countries and we're adding 3 more in 2022. We needed an additional headcount and increased manpower to address fraud concerns.
Why is real-time AP auditing important?
Matthew Tillman: ...only 27% of the world's invoices are audited…without a real-time auditing solution you run into problems where your data is old. Your data goes stale very quickly, and subsequently, you end up in a situation where you have clawbacks. What I wanted was a solution that prevented overspending in the first place by removing duplicates and fraud upfront. Then on the backend guaranteed that every line item is correct from currency for conversions to customs clearance, and matching the bill of goods received to its expected purchase order. We went one step further with our solution by doing real-time contractual compliance. We take the downstream information of the goods required in inventory and match the upstream contract with the parcel delivery service. We've gone deep on supply chain audit and we focused on how fast we could do it. We were able to 10x the industry average with our platform.
How can we improve supplier relationships and master data?
Jose Sorondo: What we are after this year is using a payment validation tool. Payment validation checks for basic errors like if we entered the invoice duplicate in different systems, transposed errors, or basic things that might not even be tied to fraud, but just errors.
Matthew Tillman: Really pay attention to the invoice itself and open every invoice. Sometimes once the invoice is entered into an ERP system, some teams forget about the invoice. Go back to the invoice, and take a look at the total amount and each line you're being charged. Just spot-check more often. I would say a lot of companies don't spot-check enough, and that’s something you can do without purchasing an outside solution. Pay attention to the invoice shape and layout to see if the invoice shape changes month to month. This includes the way the boxes are laid out and where the vendor contact information is. You can confirm the validity of the invoice very quickly with a conversation with your vendor. The second tip is to email the email address in your ERP system, not on the invoice.
Do these spot checks randomly throughout the year by having someone in your team confirm that your vendor has not been compromised.
Learn more about how our real-time AP automation software can strengthen your fraud controls and save money immediately by scheduling a demo with an OpenEnvoy expert today, visit https://openenvoy.com/contact-us/.
