By Daniel Ball, SVP Innovation at Medius
It’s a stressful time for many businesses across the world, particularly in the UK. Record high inflation levels – currently at 11.1% – in addition to the fallout of the pandemic, have caused many business leaders to focus on issues such as volatile costs for resources, supply chain disruptions and rising labour costs.
Yet whilst this is causing many businesses to take steps to alleviate financial pressures in the aftermath of the global health crisis – and current global financial crisis, many finance professionals are missing a cost-saving opportunity right under their noses – payments fraud.
The rise of financial fraud does not only impact the workplace, but the wider economy, hence why the UK government is currently developing its Economic Crime and Corporate Transparency Bill, which aims to introduce robust measures to tackle worsening corporate crime and money laundering schemes.
Clearly, payment fraud is a huge drain on businesses. The latest Financial Census surveyed 2,750 global finance executives, including 501 finance executives in the UK – and discovered that UK businesses lose on average over £290,000 each year to invoice fraud.
Shockingly, 1 in 5 finance professionals are unaware or unable to even estimate the cost of invoice fraud to their business, which is particularly concerning in an economic downturn. Additionally, many finance departments struggle to source where the fraud-risk areas are within their businesses.
AP Automation is a game-changer when it comes to cost-cutting and creating a channel of visibility when it comes to invoices, spend and cash flow – all of which is necessary in the current economic climate. So what can businesses do to tackle this burgeoning issue head on? Here are three tips to help Finance and IT teams identify and reduce fraud.
1. Don’t neglect supplier details
In a fast-paced workplace with multiple moving parts, it’s very easy to neglect the details. However, overlooking the small print provides the perfect conditions fraudsters need to syphon company funds into their back pockets. To mitigate or prevent this, Finance and IT departments can vet their suppliers using technology.
This starts at the very beginning: from supplier initiation, verifying all contact information – including supplier tax identification numbers – all as part of the supplier onboarding process. But it doesn’t end there. Businesses must continue to pay attention to the details through ongoing data analysis – via AP Automation – into business models. This is crucial to spotting anomaly or unauthorised payments and unusual transaction timings.
2. Install robust operating procedures
Creating a robust security system will significantly benefit businesses in the long run. Human error is real and stressed and stretched employees are more likely to let fraud slip through their fingers. Additionally, limited resources and high talent churn, particularly in a post-Covid, pre-recession world means that companies can’t realistically monitor every aspect of payment transactions. Automation is a lifeline here. Reducing the administrative burden on employees and adding an extra layer of security, which automatically flags new and unfamiliar payments – all in real time.
3. Keep ahead by investing in technology
Keeping a step ahead of fraudsters is a game-changer. Whether fraudsters are from inside or outside a business, technology can help catch fraud and build a robust system which can differentiate between legitimate and illegitimate payments – identifying duplicate transactions, and unusual payment patterns. Automated anomaly detection systems can also be tailored to recognize verified transactions and who authorises payments. This helps finance and IT teams instantly spot red flags and identify potentially fraudulent activity.
While fraudulent activity is by no means a new threat for business, it could potentially rise over the next two years as the UK grapples with a possible recession. Fraudsters will be able to take advantage of changing economic headwinds and seek new opportunities for fraud as businesses face increased daily pressures, ranging from spiralling and ever-changing costs for resources, to supply-chains in flux, and staff who are struggling to cope with rising demands from businesses.
There is a growing onus on business leaders to turn a sharp spotlight on high fraud-risk areas, particularly payment processes. The key to achieving this, especially during an economic downturn, lies in having a proactive and collaborative mentality. In practice this translates into daily cooperation and communication between Finance and IT departments, which will not only flag unusual or unauthorised transactions, but could save businesses over £290,000 every year.