Fraud in accounts payable (AP) isn’t just a possibility – it’s a growing reality. From fraudulent invoices to unauthorized payment requests, AP departments are prime targets for cybercriminals and bad actors looking to exploit process weaknesses. As organizations shift to digital-first financial operations, securing both invoice processing and payment transactions has never been more critical.
Without the right controls in place, organizations face financial losses, irreparable reputational damage, and operational disruptions. Some organizations may even risk the wrath of regulators.
This article reveals the latest fraud schemes targeting AP departments and outlines key strategies AP leaders can implement to fortify their invoice-to-pay process against evolving fraud threats.
Types of Fraud Targeting Accounts Payable
High-tech conmen are using a variety of tactics to exploit weaknesses in business-to-business (B2B) transactions. Some of the most common types of fraud your AP department may encounter include:
Invoice Processing Fraud
- Invoice fraud. Fraudsters submit fraudulent invoices for goods or services that were never provided. Without proper invoice validation and supplier onboarding, these invoices may be paid before the fraud is detected.
- Duplicate invoices. Fraudsters or even unscrupulous suppliers may submit the same invoice multiple times in hopes of receiving duplicate payments.
- Inflated invoices. A supplier might increase prices, add unauthorized charges, or overbill for services rendered.
Payment Processing Fraud
- Phony bank account change requests. Fraudsters pose as legitimate vendors and submit fraudulent requests to update bank account details, redirecting payments to their accounts.
- Business Email Compromise (BEC) attacks. Fraudsters gain control of a legitimate email account and use it to instruct AP teams to send payments to fraudulent accounts.
- Phishing schemes. Cybercriminals send deceptive emails that appear to be from trusted sources, tricking AP staff into sharing login credentials or payment data.
- Compromised payment credentials. Stolen payment card details can be used for unauthorized transactions.
- Check fraud. Fraudsters alter or forge checks to redirect payments, often using stolen account details or counterfeit checks to exploit organizations still reliant on paper-based payments.
Each of these schemes poses a growing risk to AP departments, but the impact can be mitigated with a proactive, multi-layered approach to securing both invoice and payment processes.
Strategies to Secure Invoice and Payment Processing
As an AP leader, it’s crucial to take a comprehensive approach to mitigating fraud. Here are key strategies to strengthen your defenses at both the invoice and payment processing stages:
Securing Invoice Processing
- Implement invoice validation controls. Require strict invoice-matching protocols, such as three-way matching (invoice, purchase order, and receipt of goods) to detect discrepancies before payment.
- Onboard and verify suppliers securely. Vet new suppliers thoroughly by validating tax ID numbers, business registration, and bank account details before approving them for payment.
- Automate invoice processing. Use AI-powered invoice processing tools to flag duplicate invoices, mismatched purchase orders, and irregular payment requests.
- Establish a centralized invoice approval workflow. Implement an automated invoice approval system that ensures invoices pass through multiple approvers before payment.
- Conduct regular audits. Periodically review invoices for anomalies such as round-dollar invoices, excessive invoice volume from a single vendor, or repeated corrections.
Securing Payment Processing
- Verify all bank account changes. Implement bank account verification solutions to confirm account ownership before processing updates.
- Enforce dual approval for payments. Require at least two employees to approve high-value or first-time payments to new suppliers.
- Utilize AI and machine learning for fraud detection. AI-driven fraud detection tools analyze payment behaviors and flag unusual transactions for review.
- Adopt secure payment methods. Minimize check payments and adopt electronic payment methods such as virtual cards and ACH with enhanced security measures.
- Encourage vendors to use a secure self-service portal. Direct suppliers to update their banking details and payment preferences through a secure supplier portal, reducing the likelihood of fraudulent change requests being processed.
- Educate your AP team on payment fraud. Train staff regularly on how to recognize phishing attacks, fraudulent email requests, and signs of payment fraud.
By implementing these strategies, AP leaders can create a secure, efficient, and fraud-resistant invoice-to-pay process. Strengthening controls at both the invoice and payment stages helps mitigate risks, reduce financial losses, enhance operational integrity, and protect your company’s reputation.
Conclusion
Fraudsters are becoming more sophisticated, targeting every stage of the invoice-to-pay process. To effectively combat these threats, AP leaders must implement strong internal controls, leverage automation, and foster a culture of vigilance within their teams. A proactive, technology-driven approach will ensure your AP team stays ahead of fraudsters – keeping your payments secure.
