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Ways to Detect Accounts Payable Fraud

Fraud has been the reason for many businesses going to the drains. Fraud leads to massive and irreversible financial losses, and worst of it all, it tarnishes an organization’s image and reputation. The most unfortunate part is that no business is safe: be it a small enterprise or a large corporation. The impact is more or less the same. One of the areas that fraudsters target is the accounts payable. Note that accounts payable is the money that a business owes its suppliers. It serves as a liability to the company. With that said, remember that any funds that exit a business have to go through accounts payable. As a result, this serves as a weak point for the businesses finances. Thieves see this as an opportunity to reap where they have not sowed.

Accounts payable employees are known for writing checks to non-existent suppliers. This is part of the accounts payable fraud. It’s illegal, and one can be prosecuted for that. Although it’s difficult to detect, you have some comfort knowing that there is something that can be done about this vice. Do not fall victim to unethical employees. Here is what you can do to detect an account payable fraud.

1. Do monthly reconciliation

One of the mistakes that most business owners make is staying for months without making entries in the check book. What you may have not realized is that the more you make accounts payable entries, the higher your chances of detecting unusual activities like employees writing cheques to themselves. It’s recommended that you do it every month. That way, you will make it difficult for the thieves to carry out their fraudulent activities.

2. Review your vendors

Deceit may be hidden right in the addresses of the vendors. Accounts payable employees, with intentions of stealing from a business, usually list non-existent vendors, which if you look carefully, you will realize that they have the addresses of your employees.

It’s for this reason that you’re advised to scrutinize the vendor information provided and compare it against that of your employees. If there are unlawful operations taking place in your business, this will be one of the places to detect it from. Check the addresses, and if you find that they are matching with that of your employees, it’s a sign that they are committing fraud.

3. Invoice oddities

Invoice oddities will help you detect fraud. What does that mean? Invoices that are not sequential, that is, in the light of numbering, should be a red flag. Most of the time, the pilferer will have several invoices with the same number. That serves as a false invoice, and you may want to look deeper into it. The chances are meager that it is an honest error.

The other areas worth paying attention to are photocopied invoices, printed invoices, and the use of correction fluid.

4. Check the phone numbers

The other item that will help you detect fraud in your accounts payable is the telephone numbers listed. How? For instance, how can someone explain the telephone number of a vendor missing in the details provided? Also, if several vendors share the same phone number, there is a chance that something is not right.

You could even go the extra mile and dial the number. If there is fraud taking place in the department, you’re likely to encounter situations whereby your calls get picked by answering machines.

5. Trace transactions

Unusual transactions may also be an indicator of strange activities in the accounts payable department. What should you be looking for here? Unusually small or unusually large amounts of transactions should be looked into deeper. Also, there would be no other explanation for transactions taking place in the night or past business hours.

To prevent problems and fraud in the accounts payable, you need to ensure that your employees are fairly remunerated. If employees feel that they are giving the business more value than what they get in return, they are more likely to turn on you. Be on the radar to detect indicators of accounts payable fraud and take necessary action to stop and prevent it.

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