Preventing Payment Fraud with AP Automation for Auto Dealerships
It may seem hard to believe, but incidents of business payment fraud have been on the rise in recent years, and the statistics are alarming: A2024...
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5 min read
February 4 2025
by
Chris Cosgrove
Auto dealerships, like all businesses, are subject to regular audits that evaluate their financial operations and work to ensure compliance with regulatory standards and industry-specific requirements. Not surprisingly, one of the most scrutinized areas in these audits is accounts payable (AP).
Because auto dealerships often deal with high transaction volumes and complex vendor relationships, ensuring audit readiness in accounts payable can be a challenging yet crucial task for AP staff and accounting managers. Thankfully, adopting accounts payable automation can significantly streamline the process and improve an auto dealership’s audit preparedness.
This blog will explore how AP automation can help your auto dealership improve its audit readiness and make sure your financial processes are transparent, accurate, and compliant—ultimately leading to significant cost savings.
Audit objectives in accounts payable are multi-faceted and focus on ensuring accuracy, compliance, and efficiency in your dealership’s AP processes. First of all, auditors will verify payment accuracy by reviewing invoices and payments to verify that amounts are correct, that the right vendors were paid, and that payments were made on time. This check and balance process is also about ensuring that all your dealership’s payments have been adequately authorized by relevant personnel.
Another key objective of an accounts payable audit is to assess the effectiveness of internal controls. In this regard, AP auditors will examine what kind of policies and procedures your dealership has in place to prevent fraud, errors, and inefficiencies. Beneficial internal controls to put in place include systems like segregation of duties, exceptions handling workflows, and approval workflows for invoice payments.
In an audit, vendor relationships are typically another element that an auditor will look closely at to validate that your payments are being made according to agreed-upon terms, overpayments aren’t occurring, and payments aren’t being missed. This process will help your dealership identify opportunities to negotiate better terms with vendors or seek out different vendors if your dealership could be better served elsewhere.
One more key aspect of an AP audit is identifying opportunities for improvement in invoice processing. In this step, an auditor can uncover inefficiencies or bottlenecks in your dealership’s AP process and provide recommendations for improvements in invoice handling—whether it’s adopting new technologies, bettering approval workflows, or eliminating unnecessary steps in accounts payable processes to make your systems more efficient.
Despite the importance of accounts payable audits, they present challenges that can make each event time-consuming and complex for dealerships. One of the primary challenges is that AP audits tie up personnel resources while they’re being performed. Staff responsible for managing accounts payable often need to dedicate substantial time and resources to gathering documents, reconciling discrepancies, and working with auditors—duties that take them away from usual work, decreasing overall productivity.
Another common challenge is fraud detection. Many dealerships lack standardized AP processes, which can lead to discrepancies in how invoices are handled, payments are authorized, and records are maintained. This inconsistency can make the audit process more difficult, as auditors must sift through workflows that may not align with best practices or compliance standards.
Dealerships that process invoices manually also often struggle with limited visibility and transparency. When invoices are handled using paper forms or spreadsheets, it can be difficult to track the status of payments in real-time and the resulting lack of visibility can lead to exceptions, delayed payments, and errors that end up getting flagged during an audit.
Managing complex vendor relationships and payment terms present further challenges that can be alleviated through an automated AP system. Dealerships typically deal with many vendors, each with unique payment terms and conditions. Without an organized AP system in place, managing these relationships manually can lead to confusion, overpayments, and errors in reconciliation.
Finally, dealerships face challenges in optimizing their purchase order processes because there’s a high risk of errors and fraud with manual AP systems. Human mistakes, such as duplicate payments or missed invoices, are more common in manual processes—especially when proper internal controls aren’t in place.
AP automation refers to the use of data technology to streamline and digitize your accounts payable processes, including the automation of invoice receipt, approval workflows, payment processing, and recordkeeping.
Over time, an AP automation solution can lead to significant cost savings for your AP department because it eliminates the need for paper-based processes and reduces manual data entry, which in turn minimizes errors and inefficiencies. Automation also allows your dealership to maintain centralized, digital records of all invoices and payments, so it becomes easier to track transactions, generate reports, and improve cash flow management.
Here are key features of AP automation that help you streamline your accounts payable processes:
Invoice capture automatically extracts and enters invoice data into your system, boosting efficiency.
Approval workflows ensure that invoices are routed to the right people for review and approval.
Payment verification guarantees that the correct payment method is used. With payment processing, you can automate the scheduling and execution of payments to your suppliers.
Detailed audit trails easily track every transaction, approval, and payment, ensuring complete transparency and accountability.
Adopting AP automation can significantly enhance your dealership’s ability to prepare for an audit while also ensuring compliance and achieving cost savings. One of the biggest advantages of AP automation is that it streamlines processes and reduces errors. Automated workflows are able to capture invoices and route them for approval according to predefined rules, which minimizes the chances of human error and helps assure that payments are accurate and legitimate.
Accounts payable automation also improves visibility and transparency by providing real-time access to invoice statuses, approval workflows, and payment histories. This enables both managers and auditors to view records quickly and easily, making the audit process much more efficient and ensuring that the AP department operates effectively. Additionally, automation creates a centralized and organized record-keeping system to ensure that all documents related to invoices and payments are stored digitally and can be retrieved instantly when needed for an audit.
Another major benefit is that AP automation enforces better internal controls by standardizing the AP process and ensuring that all transactions follow predefined rules and are reviewed by the appropriate personnel. The result is a reduced risk of fraud and errors and assurance that your dealership is adhering to regulatory requirements and best practices for compliance and financial reporting.
Finally, AP automation makes it much easier to generate audit-ready reports. Automated systems track every transaction, approval, and payment, creating a comprehensive and detailed audit trail for real-time visibility. During an audit, your team can quickly generate reports that show the entire history of AP transactions, ensuring that auditors can review records efficiently and without disruption.
To improve your dealership’s audit readiness, take the following steps:
An AP automation solution helps streamline processes, aids in cost savings, and helps stage your dealership for growth.
Implement a comprehensive AP automation solution that streamlines invoice capture, approval workflows, and payment processing.
Develop clear procedures for handling invoices and payments to assure consistency across all transactions and improve account reconciliation.
Regularly review your AP workflows to assure that they comply with industry regulations, tax laws, and accounting standards.
Invest in training your AP team to use automation tools and maintain internal controls effectively. Your AP automation solution provider should be a primary resource for this ongoing task.
Incorporating an automation platform for AP automation into your dealership's financial processes can greatly improve your audit readiness. By streamlining workflows, enhancing visibility, and creating digital records, AP automation helps your dealership maintain preparedness for an audit.
With better internal controls, more accurate financial records, and faster access to information, you can reduce audit risks and stay compliant—all while saving time and improving operational efficiency.
Ready to make your dealership more audit-ready? Explore the power of AP automation today with CloudX. Request a free demo by filling out our online form.
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