David Thorley, Director of Customer Development, FISCAL Technologies
The end of the year often marks a time of relaxation for many up and down the country but for finance departments it’s a month of mayhem and stress – it’s the month that the yearly financial audit is conducted. Unlike the years before, this year will see finance teams struggling to go about the auditing process due to a number of changes in response to the Covid-19 pandemic.
Although already considered a hectic process during a fairly normal year, the new challenges many have faced since the initial lockdown at the start of the year has increased pressure. The changes to the working environment and team structure on top of the expected rise in internal fraud has enhanced the anxiety amongst finance teams. [1] So the question remains, how can finance departments up and down the country safeguard compliance while undertaking the auditing process during Covid?
How Covid has affected finance departments
Before answering this question, it is important to understand what issues financial departments have been dealing with since the initial outbreak began at the start of the year .
Understanding the structural and operational changes
With almost no prior planning, companies were required to change their operational structure to meet the demands of the government. This meant office workers working in a range of industries had to begin adapting to a new working environment, which included operational and structural changes.
Structural change within a company leads to errors and opens the company up to an attack. Organisational change across the P2P function (systems, centralisation, decentralisation, acquisitions and mergers) increase the risk of duplication, error and fraud. At times of great change when systems are being configured and resources stretched, errors and omissions occur and processes take time to adapt. This creates a window for sophisticated fraudsters to target transformation projects, often something they accomplish with ease. But how?
During ERP migrations the Master Supplier File (MSF) is frequently left untouched and simply copied in its entirety from the old to the new system. Commonly an ERP migration project only copies open transactions to the new system, leaving historical intelligence behind. Critically, the important transaction history is often lost. Essentially spotting irregularities relies on comparing suspect transactions with this self-same historical data. This means duplicate payments or payments sent to a fake address can slip through the net.
Increase in fraud
Internal control weaknesses were responsible for nearly half of frauds, pre-Covid.[2] However, pressures on the supply chains, like the urgency to secure supplies during a time of crisis or emergency, increases the incidence of fraud. Therefore, it is no surprise that we have seen a 400% rise in procurement fraud relating to the Covid threat.[3] A factor in this rise has been time restrictions and fear of shortages, which has caused organisations to override established procedures.
The prevalence of fraud during the pandemic has shown that organisations have weak fraud prevention systems in place. For example, the Finance ERP and P2P systems on which many businesses rely – often described as the heart and lungs of a company – are known to have vulnerabilities that lay companies open to fraud by insiders and third-parties alike.
An efficient payable assurance solution
Investing in a secure, strong end to end payable assurance solution is a significant factor in helping to tackle these challenges. The right solution will enable organisations to stop payment errors before they happen but it also gives route cause and analysis. That root cause and analysis enables finance departments to look over old processes and understand which ones were not followed correctly. It also allows them to find where their compliance may have been breached; where trends, and even down to the individuals tractions, may not be following those processes.
By offering a vast range of data that supports best practice but informs changes to processes as well as informs of compliance breaches, allows a financial department to trust the procedure they have in place. This is a vital step considering many organisations have to process thousands of invoices per month. Therefore, having a robust, effective and secure solution to check and validate everything that goes through an ERP system will provide greater value, as well as benefit compliance, governance and reduce costs.
What the future holds
This December will be a tough month for finance departments who will be ensuring compliance during the auditing process – the process will be made even more difficult with Covid. To limit these difficulties, it’s important to invest in the correct end-to-end payable assurance solutions for your business. Doing so will make the process less time consuming and more accurate. The depth of forensic analysis provided by the right solution can result in high-risk transactions being identified that had previously been missed, as well as spot transactions that are unusual. To get through this difficult period it’s essential we continue tackling the challenges that head our way, this means continuing to adapt, innovate and adjust.
