CloudX Blog

Can AP Automation Technology Really Decrease Fraud Risk?

Posted by Chris Cosgrove

Apr 15, 2013 3:22:00 PM

How to get the bad guys perpetrating AP Automation fraud!

Ever seen this kind of an affair in an AP organization?


One of the primary challenges that every Accounts Payable process leader has to come to terms with is the reality of payment related fraud.  Unfortunately, in most situations, it involves some level of complicity between internal employees and external cronies.  Worse yet, in many situations the  fraud scheme occurs over a period of time during which it is not quickly detected and in that period of time the damages can be extensive.  To add insult to inury, it’s a rarity that the funds lost actually get recovered, as most absconded dollars get spent funding lavish lifestyles and other wasteful ways.


So the question is how can Accounts Payable automation technology do anything to hedge the exposure to fraud risks?


3 Ways AP Automation can help address the issue:

1.  Flag Exceptions  - We discuss this in greater detail in this blog post here, but suffice it so say that some AP fraud schemes are simpler than others while others are decidedly more complex.  With that said, any strange changes to vendor master file information, repetitive payments, excessive dollar amounts around a period of time can all be indicators of a fraud program in motion.  With that said, you can leverage a variety of triggers to kick off escalations and workflows to get actionable data into Supervisory hands.  Now…if you’re problem is from a Supervisory level…that definitely complicates things.


    2.  Display Dynamic Reporting – Not to be discounted, but the ability to pull data and supporting documents faster is also a boon for curbing fraud in your organization.  When you consider that the act of pulling together supplier payment data is an time and space consuming task when done in a manual setting, the transformation to an electronic process is about as different from communicating on stone tablets to today’s electronic tablets.  Because of this, and the underlying foundation of using indexed metadata to drive business intelligence, you can quickly assemble reporting to investigate potential frauds much more efficiently than digging out boxes and folders and files (OH MY!).

    3.  Enable Better Analysis – This ties in directly to the above points, but by flagging exceptions as they occur and then providing a faster and easier way to pull supporting information, ie. through Accounts Payable software (document management technology etc.) you can foster better analysis.  If we’re honest, no system can prevent fraud 100% of the time. Precisely because people involved in the system are most likely the ones that are perpetrating fraud, it’s entirely possible that they’ll enact workarounds to continue the deception.  So, it may not be a bad idea to use the time recouped from AP process automation improvements to implement more standardized, regimented internal audit cycles as a means to safeguard the organization.  Alternatively, it’s also not a bad idea to engage specialized firms in recovery audits for this process.  While audits are never exactly priority on the fun scale, they definitely make sense to identify gaps, loopholes, and issues in the Accounts Payable process, and can serve as valuable tools in fighting fraud in your organization.


    So in summary, AP automation tools, can empower Finance leaders to get better visibility and process controls in place, and in turn expedite processing while escalating exceptions for review, but there will always be a need to synthesize analysis and investigation to serve as a sort of checks and balances to an area that could otherwise be exploited.


    What are some ways that you have seen fraud addressed in your AP environment?  We’d love to hear, so please post a comment below!


    If you’re interested in learning more about vendor portal technology and how it defies the time space continuum or how by leveraging Accounts Payable best practices you actually can increase your vertical jump by 6” guaranteed, or if you want to identify what risks in your AP process are more dangerous than an angry sasquatch click below!

    Or for the smarty pants that don’t understand the references above…it’s this little thing called humor…maybe you’ve heard of it…?

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    Topics: Accounts Payable Process, AP Process, Accounts Payable Automation, Improve Accounts Payable, accounts payable system, accounts payable software, Invoice Processing, ap automation, accounts payable fraud

    Accounts Payable Process Transformation Demands Excellent Leadership

    Posted by Chris Cosgrove

    Mar 12, 2013 10:43:00 AM

    Take Me To Your Accounts Payable Process Transformation Leader!

    Why do some great organizations fall by the wayside?

    In a word....complacency.  Anything untended for periods of time is destined for entropy, and ultimately failure.  I recently read a very insightful book, How The Mighty Fall, by Jim Collins.  In it he essentially deals with why major, fabled organizations ultimately succumb to mediocrity, become outmoded, and eventually languish and die.  Interestingly, one of the comparisons that he draws is between the management (or mis-management) differences between Information Technology giants IBM & Hewlett-Packard.

    Both organizations have been around for decades, and both, by the early 90’s, had become juggernauts in their respective space.  However, both organizations faced similar challenges from evolving market needs, increased competition, pressure from high growth technology disrupters, and many other factors.  Interestingly, they each set about a transformation process that was fundamentally different from the other.  IBM chose Lou Gerstner to lead the helm in the mid 90’s and in doing so set about a process of introspection, analysis, and slow, but determined change.  HP couldn’t have been more opposite.  In selecting a dynamic Carly Fiorina in the early 2000’s, HP set about rapid transformation of its wholesale strategy to reflect the massive upheaval created by the dot com bubble.  Interestingly, Gerstner is credited with saving IBM from going under by transforming it from a predominantly hardware manufacturing organization to a highly competent, global consulting organization.  Fiorina, was ousted by the board at HP within three years, and in the process lost half of HP’s shareholder value.

    Now, without being too simplistic, there are many factors that affected both organizations, but one underlying premise is that transformation that comes at the hope of a messiah often fails to deliver, in a business context, as IBM’s transformation and HP’s languish points out.  With regards to Accounts Payable process improvement, we couldn’t agree more.  To effectively transform the AP process you need to couple the qualities of dis-satisfaction with the status quo and dogged persistence to elevate performance and productivity.

    Our point here is that changing an organization, or a way of doing business, or a business process essentially boils down to the same thing.  You need to gain support from the stakeholders in the process to undertake the change and get sponsorship from the authorities to make the tough decisions and changes that need to be made for anything to improve.  Change is tough, and tough change is certainly not going to win you any popularity contests in the short term.  However, what matters is building an enterprise, business, department, or team that performs, and in many cases leaders know what has to be done, so diligent planning and methodical follow  up and follow through can be the key difference maker in going from mediocrity to excellence.


    In the case of Accounts Payable, here’s a short list of ways you can look to improve and unshackle yourself from the status quo.


    -Developing a Procure to Pay mindset, ie. beginning with the end in mind of how the entire supply chain process works and can be improved

    -Collaborating with other departments, Procurement, Receiving, etc.

    -Transitioning invoice processing from a clerical to a strategic function through technology and skill set empowerment, ie. AP automation technology & training in effective negotiating (using this as a lever to obtain increasing supplier discounts)

    -Technology systems like Accounts Payable software, ACH/P-Card payment technology, Vendor Portal Technology, etc.

    -Adhering to Accounts Payable best practices, by the way, there are some great resources available at places like The Accounts Payable Network or Paysteam Advisors to help you in identifying these.

    -Using AP Services to optimize your process and reclaim lost monies, ie. Document Process Outsourcing providers, AP recovery audits


    Part of the change process is establishing benchmarks for where you’re presently at from a performance perspective.  If you’re interested in learning how you stack up to industry benchmarks (for better or worse, but not til death do us part), we invite you to participate in our complimentary rapid AP efficiency assessment.  At the worst you can see how awesome you are (at least in your own mind J) and see if there might be any risks in your process.  Taking the actions necessary to remedy those risks and improve the process is a decision we leave entirely up to you!

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    Topics: Accounts Payable Process, AP Process, Accounts Payable Automation, Improve Accounts Payable, accounts payable system, accounts payable software, Invoice Processing, accounts payable best practices, ap software, ap automation

    Accounts Payable Software - 5 Reasons Companies Don't Use It

    Posted by Chris Cosgrove

    Jan 16, 2013 10:15:00 AM

    5 Reasons Companies Don't Use Accounts Payable Software 

    So what’s the deal? 


    With the abundance of good information on all the reasons why organizations could and really should automate invoice processing by way of an AP system, it’s kind of amazing that a relative few have done so.  Sure, over 60% of companies use some form of imaging in the processing of their invoices, but only a subset of that use OCR technology to automate invoice entry and get out from the mundane aspects of Payables processing.


    Leveraging automation technology is essentially an Accounts Payable best practice, so what gives?


    Here are five reasons companies don’t automate their Accounts Payable process?


    Companies don’t invest in Accounts Payable software for process automation because:


    1.  It is very COSTLY!

    As we’ve discussed in a variety of posts all the components that go into a successful AP improvement initiative are very costly.  With that said, unless there is a compelling business case and justification of the investment, the project was most-likely dead before it ever started.  If the investment exceeds what your allocated budget is in your organization, it is most-likely not going to get off the launchpad.  This is a consideration that begets looking into AP services as opposed to just software as a solution, typically due to less restrictive minimal capital investment requirements.



    Interestingly this is the second most common reason organizations have not automated their Accounts Payable process, according to Paystream Advisors.  This is a bold assumption, and unfortunately for many inefficient organizations, a costly notion that deserves to be challenged.  The issue with challenging this becomes one of benchmarking organizational AP benchmarks and metrics against industry  standards.   (As a side bar, we offer that as a complimentary service to those who want to better their AP process rapidly, here!)  Until and unless you study out exactly where you stand with respect to industry benchmarks, you’re really not in a position to say whether they are effective or efficient (from a best practices perspective).  To a degree this notion mimics the hubristic attitude that Jim Collins cites in How The Might Fall, when analyzing organizations in decline.  The ideas that good enough is sufficient to operate by or there's no room for improvement is worse than's dangerous.  This is equally so for Accounts Payable managers as it is for their CEO's.



    While this directly relates to the first reason, it’s important on it’s own as well.  This is a primary consideration for those companies that are bringing in software in-house and ‘on-premises’ in terms of delivery.  Because most of those approaches require significant upfront capital investment, you can believe that when a Controller/CFO type looks at this, they are looking at the financial justification.  If something that is costly does not produce a commensurate or greater financial impact on the organization, it is not likely to get any traction.  Would you put a 500k band aid on a 50k problem….not likely!

    However, the good news is that because of cloud-based delivery and SaaS approaches to Accounts Payable software, many of these deterrents are fast disappearing.



    When you start to look at the breadth of options to improve AP, it can be quite staggering.  Accounts Payable Software, automated payment technologies (ACH, P-Card), E-Invoicing, EDI, P2P, and a host of other terms start to pop up and quickly create confusion.  This is why it’s important to isolate the areas for improvement and to consider phasing in organizational change over a defined period of time.  If you try to take on revamping your entire process at one time it’s kind of like eating an elephant.  You need to look at the various components to the supply chain process and tackle them in sequence.  Procurement and PO systems are one thing…AP systems another….automated payment technologies another.  Each one of these has merit and is worth examining in detail to create a better end state.

    Also, this is the primary reason we explore these issues in detail in our e-Books.  We view it as a privilege and responsibility to educate would be customers and partners about the best ways to automate their payables processing, and you can do so here!  It always amazes me the number of Finance leaders that we talk to who have only a cerebral understanding of technologies like OCR, and most often, it’s highly dated.  With that said, once they understand the implications of automated invoice processing in the context of where technology impacts, affordability, and achievability intersect…they’re typically pretty stoked!



    Similar to capital constraints that hold back so many organizations from deciding to automate payables improvements, many organizations are stretched thin in terms of available resources to execute and administer accounts payable software solutions.  This is primarily due to the fact that it is again, niche technology, and if there are resources to be invested, they will predominantly be deployed in alignment with projects that relate to the core focus of the business.

    In selecting AP services or solutions providers, it’s imperative to partner with an organization that requires limited IT involvement, as it greatly assists getting these types of initiatives approved and on their way to being a reality!


    You can see the industry data here:

    Top reasons companies don't automate Accounts Payable!


    To learn more about whether AP Automation or E-Invoicing is right for your business and other Accounts Payable best practices, click below!

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    Topics: Accounts Payable Process, Improve Accounts Payable, ap system, accounts payable system, accounts payable software, Accounts Payable Solutions, ap services

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