5 fraud prevention tips for your organization’s payment processes

by Victoria Holthaus, CPA

Every organization, regardless of its size or nature, is susceptible to fraud—especially when it comes to its payment processes. The opportunities for a fraudster to act are abundant; they can arise in everything from paying vendors to reimbursing employees for expenses. Unfortunately, many fraudsters are good at what they do and organizations are left to, quite literally, pay the price.

Thankfully, there are steps you can take to help make your organization’s payment processes airtight against fraud. Here are a few best practices to consider.

1. Automate your accounts payable process.

Using software to automate your accounts payment (AP) process can not only improve its efficiency but it can also help to prevent fraud. Many organizations have access to AP automation through their enterprise resource planning (ERP) systems. Those that do not may leverage third-party providers, which are often fairly cost-efficient.

When it comes to fraud prevention, one of the primary benefits of automating your organization’s AP process is the use of AI and machine learning to detect fraudulent invoices. (These can be nearly impossible for the human eye to discern.)

Once an invoice is emailed to or scanned into the AP system, the software uses AI or text recognition to pick up nuances such as incorrect vendor information, duplicate invoices, or even phantom vendors. This can provide you with a valuable first line of defense against fraud.

While these tools are highly effective, it’s still important to have human oversight to review flagged transactions. This can help to prevent legitimate payments from being delayed.

2. Implement payee positive pay with your bank.

Opportunities for fraud can also exist within the process of writing checks for vendors. To help prevent this, consider implementing payee positive pay with your bank.

Positive pay is a fraud prevention tool that helps catch counterfeit checks or unauthorized transactions before they are processed. Most banks offer positive pay as an automated cash service.

Typically, positive pay involves writing checks in batches and sending these, along with a list of the check numbers, payee names, and amounts, to the bank for deposit. The bank reviews the checks and lists and flags any inaccuracies for your review.

3. Outsource check writing to your bank.

Many fraud prevention experts suggest limiting check writing to maximize fraud prevention. However, if your organization does have a need to issue checks, consider outsourcing this to your bank. The benefits are two-fold: You can free up more of your finance department’s time while adding an effective anti-fraud control.

4. Don’t allow vendors to change their banking information from your website.

If your organization has a vendor portal on its website, consider preventing vendors from changing their banking info via the portal. Instead, require them to contact a staff member to make these changes.

A vendor requesting a change to their banking info, address, and phone number at the same time could be a red flag for fraud. In this instance, ask them to provide their old and new information so you can validate the vendor’s legitimacy. Another safeguard is to call the vendor at a known phone number to verify the request.

5. Keep an eye on your accounts.

This may sound obvious, but it can be easy to put off monitoring your organization’s accounts when things get busy. Checking account activity daily and, more importantly, reconciling accounts in a timely manner can help you catch instances of fraud before they become major issues.

Take steps to prevent fraud with airtight payment processes.

Protecting your organization’s payment processes against fraud can also help you improve its efficiency. Making these changes, however, can be slow-going.

To help you take the necessary steps toward fortifying your payment processes, the professionals at Abdo Financial Solutions can guide you through the process. From advising on AP automation software platforms to helping you implement change, we’ll be with you at every step.

To learn more about how we can help you navigate fraud prevention, contact us today.