The accounts payable (AP) process can be quite risky for businesses. Payment fraud is increasing, and manual payments offer dishonest employees an easy way to steal money from the company. AP automation reduces the risk of this happening. It also reduces the risk of duplicate payments and non-compliance.
Read on to learn more about how AP automation can mitigate the risks of the AP process.
AP automation reduces the incidence of fraud
Payment fraud is one of the most significant risks associated with the AP process.
Unfortunately, data shows that payment fraud is becoming more common. Such fraud is often committed by trusted accountants. However, an automated AP platform can prevent this fraud from happening.
Automated AP platforms reduce payment fraud through three processes. First, duties get automatically segregated so that the employees who approve invoices are not the same employees who authorize payments. Secondly, leading AP programs use dual-factor authentication, making it nearly impossible for hackers to access an employee’s account. This reduces fraud committed by people outside the company. Finally, many automated AP programs utilize positive pay files. This involves the program sending a log of checks to the company’s bank to ensure that the check was authorized.
Fraud that does occur is easier to identify
Even the best automated AP programs cannot completely eliminate payment fraud. However, these programs also make it much easier for businesses to identify payment fraud that has occurred. This is because AP automation programs centralize all payments. This makes it much easier for multiple managers to keep an eye on each payment the business makes. Many payment fraud schemes succeed because the companies decentralize payments so that only one authorizer can see the data for each category of payments. This could make it easy for one payment authorizer to commit large-scale payment fraud. An automated AP program would make it nearly impossible to get away with this kind of fraud.
Eliminating duplicate payments
Duplicate payments are costly and embarrassing, yet they are relatively common when a company processes invoices manually. If there is some confusion among accounts on who is responsible for processing a payment, more than one accountant may process the same invoice. This can cause a duplicate payment. Such payments are not only expensive, but they make the company look disorganized.
Automated AP programs track each invoice through every stage of the process. These programs automatically check to ensure that they are not making duplicate payments. This eliminates the errors that lead to duplicate payments.
Increasing compliance levels
Companies that process invoices manually run the risk of non-compliance. This is because it is more difficult to track expenditures accurately. This could lead to incorrect tax filings. Incorrect tax forms may lead to expensive fines.
Eliminating the risk of lost invoices
Lost invoices are one of the most significant risks during the accounting process. This is because lost invoices are relatively common (at least for companies that process invoices manually). Also, losing an invoice can have several negative effects.
Lost invoices risk harming relationships with vendors. This is because vendors often get paid late when an invoice is lost. Companies are often unaware that they have lost an invoice until a vendor complains about not being paid.
Lost invoices also make it harder for companies to keep accurate financial records. This can result in management making uninformed decisions that negatively impact the company. For example, a company with a serious problem with lost invoices will have lower throughput. This may result in management reducing the department size because they believe the workload is lower than it is.
Automated AP programs track invoices every step of the way, greatly reducing the chance that an invoice will be lost.
Reducing the risk of human error
One of the biggest risks businesses of all kinds have to deal with is the risk of human error. Human error is inevitable when processes are performed manually, even if employees are well-trained. However, automated processes require less human intervention, reducing human error risk. Human errors in the AP department are especially important to avoid, as these errors directly impact a company’s finances. An automated AP program reduces the risk of harmful human errors in this area.
Companies can reduce risk by investing in AP automation
Investing in an automated AP platform is one of the best ways to mitigate business risk is by investing in an automated AP platform. Such a platform will make it much harder for employees to commit fraud. It will also reduce the risk of unintentional errors like duplicate payments and non-compliance. When one stops to consider how much risk an automated AP program can eliminate versus the low costs of such programs, it’s clear that AP automation is a worthwhile investment.
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