These days, business owners and employees have plenty on their minds. We’re all understandably distracted. But in times of turmoil, malicious intent thrives. Every day, security threats emerge— new phishing attempts, data breaches or internal fraud both by design and human error.
What does this mean for the security of bookkeeping processes? Right now, many organizations are focused on new ways of doing business and ensuring effective remote work, but they also need to know that systems are in place to help ward their companies against fraud. One key way is to take steps that help protect them from AP fraud.
The realities of the fraud threat
According to J.P. Morgan’s 2020 AFP Payments Fraud and Control Survey Report, 75% of organizations experienced business email compromise (BEC) in 2019, and 38% of them reported financial loss because of it. When you consider that businesses spend $510 billion annually in B2B payment costs, payment-related fraud is a major concern. This was reported during “business as usual” times. Today’s uncertainty makes opportunities for fraud even more prevalent.
Fraud can come from both external and internal sources. According to a recent survey conducted by Bill.com, check fraud makes up 16% of outside fraud threats an organization experiences. Insider threats – security risks that originate within a targeted organization – make up approximately 10% of fraud in small and mid-size organizations. Bookkeepers are in a trusted position to help their clients secure vital processes like AP.
Here are five ways firms can help their clients button up those potential areas of risk:
Say “so long!” to paper checks
Sending paper checks requires close-quarters collaboration like obtaining signatures and preparing mailings. These tasks work against social distancing when people are onsite and are simply not feasible in remote working times.
More importantly, paper checks offer criminals everything they need to commit fraud. There are many ways that information can be exposed, from a check being shown on TV to a check delivered to the wrong address or taken out of a mailbox. Imagine a check mistakenly delivered to the wrong address or left visible in someone’s car while running errands – your client’s financial information is now ripe for the picking.
If clients must still use paper checks for certain payments, it’s good practice to use an online bill payment solution to do so. You can then directly transfer money electronically from your business account to the recipient. If your recipient doesn’t accept electronic payments, many of these solutions will generate paper checks with the payment vendor’s bank information, not your client’s...
Don’t give away the keys to the kingdom
Often, businesses want to take the easiest path to collaborating with bookkeepers. For example, they may offer to share their bank account login information. While it may be one option, it can give fraudsters an opportunity to transfer money out of your business account in just a few clicks. Alternatively, they can sneak payments of their own bills or for their own purposes into the system unnoticed by your client. Access to banking accounts should be stringently limited. Even better, explore solutions that set permissions by user for digital payments. That way, you limit access to bank accounts and significantly reduce chances of fraud.
Automate and enforce the separation of duties
Automation not only makes AP more efficient and productive for all parties, it has the added benefit of enforcing a separation of duties. AP automation follows established payment guidelines that are unique to each company, ensuring that only designated participants review bills and associated documents and approve payment before automatically moving the bill to the next step. With AP automation, only authorized individuals can access the AP process. This makes it much easier for bookkeepers to keep the separation of duties intact, thereby significantly lowering the chances of fraud.
Track everything
In the event that fraudsters do manage to break through, you need to be able to retrace the entire AP process to determine where things went wrong. Audit trails of review, approval, and payment activities make the task far easier.
Cloud-based bill payment solutions automatically create audit-ready trails that contain this critical information, so you can quickly assess who was involved, what questions were asked, and more. Being able to track the steps of the AP process and isolate the fraud will help protect both the firm and its individual employees, eliminating guesswork and baseless finger-pointing.
Stay positive
Positive pay, that is. Positive pay is an automated fraud detection and prevention tool designed to detect counterfeit, forged, or altered checks. With it, banks process each check and ensure that the check issued matches the check presented for payment.
Many bill payment solutions today include positive pay. Making sure that your clients are using a solution that offers this feature will go a long way toward helping them avoid check fraud that might compromise their AP processes.
The best defense is a great offense
Fraud continues to be a lucrative trade, and small businesses continue to be prime targets. These uncertain times have unfortunately done nothing to slow business fraud – if anything, your clients need to be more vigilant now than ever. The best thing you can do to protect your business clients from AP fraud is educate them on the risks and show them how to counteract them with the best preventative tools and procedures available.
Jeannie Ruesch, Director of Marketing at Bill.com
Bill-com_Intrapreneur_Author_JeannieRuesch
About the Author:
Jeannie Ruesch works as the director of marketing at Bill.com and has worked in the accounting industry for more than seven years. She previously worked at Xero and at The Sleeter Group.
She has more than 20 years in brand creation and strategy, design, social media development, demand gen and customer marketing. She’s a tech geek at heart, an author, an award-winning graphic designer, and loves finding ways to help customers solve problems.
Jeannie has contributed several articles to Insightful Accountant and her writings have been warmly received by our readers.