An intelligent way to prevent accounts payable fraud

Accounts payable fraud can impact any business, regardless of its size. The organisations that are most vulnerable are those without robust systems for verifying invoices against purchase orders and evidence of goods or services received. When controls on invoice approvals and payments are not consistently and rigorously enforced, this creates an opportunity for financial crime.

Fraudulent parties can come from within or outside the enterprise; and they have various ways of cheating the system. Some set up fake vendor accounts and create invoices for products or services that were not delivered, while others are employees who process duplicate or inflated payments to seemingly legitimate vendors yet manage to channel the extra cash into their own bank accounts.

One case that made headlines in Australia last year was an investigation into a multimillion-dollar supplier invoice payment fraud scheme involving employees at National Australia Bank (NAB) and a long-standing external supplier. According to a police statement, investigators were told “about a scheme whereby a person would allegedly receive corrupt commissions to authorize payments by a financial institution of invoices for a contractor, which were in excess of the agreed value of the contract.”[1]

One way to keep your company out of the negative news is to build three-way matching into the invoice verification and approval process.

What is three-way matching?

Three-way matching is a technique that accounts payable (AP) departments use to verify whether invoices received are genuine, before approving these accounts for payment. This approach involves a three-way match between the following documentation:

  1. Invoices
  2. Purchase orders
  3. Receiving documentation

Firstly, the information on the supplier invoice needs to be compared with the information on the related purchase order. The data involved includes quantity of goods and services, the agreed price, vendor details and so forth.

Secondly, the invoice data must also be compared to the information on the documentation that has been compiled by the receiving department, to ensure that the goods or services being charged for have indeed been received, and that quality requirements have been met.

If any matching discrepancies are noted or information is missing, the invoice can be held back from the payment queue and sent to the relevant team for further investigation.

Unfortunately, when the three-way matching process is managed manually, this incredibly labour-intensive work can monopolise AP employees’ time and lead to payment delays. This not only negatively impacts relationships with suppliers and vendors, but also puts the company at risk of losing out on early settlement discounts.

Is automation the answer?

You can alleviate the burden on the AP team and make this process more efficient by using an automated three-way matching solution that integrates seamlessly with existing enterprise resource planning (ERP) systems.

However, conventional automation approaches often require data to be fed into the system in a standardised and machine-readable format. Given that many invoices arrive as printed or scanned documents, email attachments and in various other formats, this means that all the invoice information needs to be extracted and formatted before the automation platform can process this data.

Typically, this calls for human involvement – which once again creates an opportunity for data entry errors and process delays, especially in organisations that receive a large volume of invoices in multiple formats from their vendors.

Making three-way matching more intelligent

An intelligent AP automation system can help to minimise human involvement by using artificial intelligence (AI) capabilities to extract and standardise invoice data, regardless of the invoice format. With an AI-enabled document capture and optical character recognition solution built into the automated three-way matching environment, it’s possible to intelligently and automatically copy invoice data from multiple document formats and standardise this in one central place; and then feed this to the automation solution, such as an RPA software robot, that is programmed to carry out the three-way matching process.

This way, the three-way matching process can be automated from end-to-end; and humans only need to be involved in a supervisory role. In other words: once the three-way match has been completed automatically, expert AP staff members can check and approve the match data before routing the related invoice for automated payment.

If this match does not pass muster, this invoice can be routed to a specific team member for additional investigation. Because staff are not being bogged down by the routine, repetitive matching work and they are only focusing on reviewing match data and handling exceptions, they can react much more swiftly when problems are identified – and escalate these for prompt resolution.

This approach helps to improve the efficiency and accuracy of the three-way matching process overall – saving time, optimising costs and giving companies more control over risk and cashflow.

Also, when the process is executed digitally, as opposed to manually, every action is automatically logged. This improves transparency and provides the AP department with a complete audit trail of activity, from invoice receipt to payment. This level of visibility makes it difficult to hide fraudulent activity. It also provides clear evidence of the controls in place, should this information ever be required by auditors or regulatory authorities.

Ready to put smarter controls in place?

With intelligent three-way matching technology powering your invoice verification and approval processes, you can mitigate against financial losses caused by fraud and human error, in a way that is both efficient and transparent.

rapidMATION’s intelligent accounts payable automation solution provides these capabilities, through a combination of ABBYY’s document capture and optical character recognition solution, K2’s low-code application development platform and UiPath’s robotic process automation software.

Keen to see what our intelligent solution could do for your business?

We’re holding a Webinar on 10 Oct 2019 to demystify the concept of intelligent automation and explain the business benefits of adopting our unique solution in your accounts payable department. Join our audience here or get in touch with us here for more details on our refreshing approach to business optimisation.

[1] https://www.pymnts.com/news/b2b-payments/2018/nab-australia-invoice-fraud/

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