Best Practices for Combating B2B Accounts Payable Fraud

In my last post, I discussed the recent findings published in the 2011 AFP Payments Fraud and Control Survey which concluded that the rate of payments fraud attacks remains stubbornly high. Continuing with this topic, here are some industry best practices for combating payment fraud as it relates to B2B A/P payments.

A single, centralized system
Centralized A/P Processing ensures that all of an enterprise’s outgoing payments are transmitted through the same system. This provides increased transparency, a common workflow-controlled release process, simplified auditing and compliance, and a reduction in bank connectivity requirements. A best practice outsourced solution can function as a Corporate Payment Transaction platform that allows organizations to centralize payment execution and integrate payment processing for all payment methods – check, ACH, wire and card. 

Centralized payment execution provides the ability to consistently implement fraud prevention best practices, including:

• Multiple levels of approval and segregation of duties
• Check stock inventory management
• Payment analysis

Approval Workflow
Configurable security controls can be used to restrict access levels of specific users within the payments application. One user may be allowed to submit a payment file for processing while another is required to review and approve payments before releasing them for processing. This is especially helpful for organizations without an ERP system that provides A/P approval workflow. While some companies may utilize their bank’s proprietary Web portal for multi-level approval, this becomes cumbersome with multiple banking relationships because employees will be required to login to multiple systems. With a single system, employees have one centralized Web portal for payment review and release. 

Check Stock Inventory Management
Minimizing check handling reduces the opportunities for fraud.  Outsourcing check printing helps by eliminating employee access to check stock and check handling between printing and mailing. This dramatically reduces the opportunities for employees to steal and alter an outgoing check to a vendor, to steal blank company checks, or to steal and misuse obsolete check stock. 

Payment Analysis
Access to historical payment data is a key requirement for many organizations. With a best practice outsourced solution all payment transaction information is stored in a secure archive which can be viewed online. At a glance, transactions can be identified that match well known attributes of fraudulent payments - rounded amounts, amounts below a defined approval threshold, duplicate payments, and payments made to shell companies for fictitious goods or services. 

Lastly, centralizing bank connectivity through an outsourced solution eliminates the need for the IT organization to develop the data feeds necessary to take advantage of bank services such as Positive Pay or Payee Positive Pay. These services are well accepted, strengthened fraud control measures that achieve greater security by providing additional points of comparison between checks presented and checks issued.  

Has your company implemented any of these best practices to ward off A/P fraud?