Vendor fraud happens when someone tricks a company into paying money to fake accounts. They do this by making fake invoices or changing payment details.
People who commit vendor fraud can be insiders like company employees, vendor staff, or outsiders who steal account information. The outsiders often swap the vendor’s payment details with their own to steal money.
These outsiders use tricks like social engineering, hacking, or phishing to get payment information. When vendor fraud succeeds, it can cause big financial losses and harm a company’s reputation. So, businesses need to stop vendor fraud before it happens by using good prevention and detection methods.
How to Spot Vendor Fraud
Detecting vendor fraud can be hard, but there are signs to watch for. Here are some:
- Strange Payments:
- Payments to new vendors or those not used before.
- Payments that don’t match past payment patterns.
- Small Differences:
- Payments that are a bit different from usual.
- Fraudsters change small amounts to avoid notice.
- Double Payments:
- Paying twice on the same date or going over the agreed contract.
- Odd Payment Times:
- Payments made late at night or on weekends, not during regular work hours.
- Changes in Vendor Info:
- Differences in delivery and payment addresses.
- Using the same order in invoices.
- Invoice numbers that aren’t in order.
To catch fraud, keep an eye on payments and watch for these signs. Also, use good internal controls and tools like AP automation software like Collect. This helps prevent and spot fraud early.
How to Stop Vendor Fraud
Preventing fraud is crucial. Here are some simple methods to stop vendor fraud before it happens:
- Check Payment Details: Compare payment info with orders to make sure money goes to the right place. Use tech like AP automation for better control.
- Verify Emails: Confirm vendor email addresses to avoid Business Email Compromise scams. Train staff to spot suspicious emails.
- Screen Vendors: Be careful when enrolling vendors. Use tools to notify you of changes in payment info.
- Keep Vendor Database: Maintain a list of vendors and update it regularly. Verify new vendors and track payment history.
- Separate Roles: Split tasks in accounts payable. Have different people approve invoices and authorize payments to prevent fraud.
- Match Purchase Orders (POs): Compare invoices to POs to ensure goods or services are received as agreed. Use automation to streamline the process and catch errors.
By following these steps, you can protect your business from vendor fraud effectively.
How AP Automation Stops Vendor Fraud
AP automation helps prevent fraud in several ways:
- Direct Invoice Submission: Invoices go straight into the AP system, making it tough for fraudsters to tamper with payments.
- Limited Access: AP automation restricts who can see invoices, reducing the chance of fraud. It also divides duties, so no one person controls everything.
- Record Keeping: AP automation tracks who approves payments and updates vendor info. This transparency discourages misuse of funds since actions are monitored.
Collect‘s AP automation platform offers these benefits and more, making it a great choice for businesses wanting to safeguard against fraud.
Create a free account here.