Raymon van Viegen, CFO at Visma | Onguard
While bad debt can lead to a range of issues for organisations, unique vulnerabilities can plague certain industries, such as in the case of those that provide machinery, vehicles and other costly assets that can consequently go missing. PwC’s Global Economic Crime and Fraud Survey 2020 discovered a total of $42bn in fraud losses reported by businesses over the course of the previous 24 months. The fraud threat is real and continuing to grow.
For businesses to be fully prepared for the threat, awareness of the two main types of risk to businesses is crucial. The first is the case of fraudsters who are posing as existing organisations in order to complete transactions with genuine businesses, and the second is the scenario of fake companies being created by criminals. It’s a risk that can pose a serious threat to businesses from numerous angles, and financial departments and credit control teams are increasingly living in fear of inadvertently facilitating a way in for bad actors.
Defence first
The screening process with a potential new client is a vital first step to identifying a bad actor and their intentions. Sales teams can also play a role in advising in the case of a red flag or suspicious piece of information that doesn’t seem legitimate. Analysing bank statements, VAT numbers and registrations with a chamber of commerce is a good starting point and can reveal any data that may appear suspect.
An order value being unusually high or an order address from an unusual country are some key signs that an experienced credit manager can notice early on. Carrying out this due diligence at an early stage is even more important as non-refundable methods of transaction become more popular, such as bank transfer as opposed to PayPal or credit card payments.
Human error or oversight is always a potential possibility, so employing appropriate technology to help under-pressure teams can provide some much-needed support to the screening process. Many current platforms don’t provide the assistance that credit managers need to analyse the data to detect for fraud. Tools such as Excel and legacy ERP systems often lack the ability to connect data internal points or integrate with real-time data from credit reference agencies and therefore are unable to provide the crucial end-to-end overview that could help the credit team decide whether to accept a new customer. Without this real-time connected insight, credit teams will find it much harder to provide an agile line of defence against evolving fraud techniques.
The role of RPA and intelligent automation
Integrating data into applications such as robotic process automation (RPA) and intelligent automation (IA) can empower the skill set of a credit professional and enhance their experience. This is where external risk management agencies such as Dun & Bradstreet or Aon come into play with specialised datasets utilising API. For example, systems enhanced with RPA could play a key role in automatically verifying whether a potential customer that fills in a form on a business’s website is who they claim to be. The same applies for addresses, as systems could be connected to cross reference against agencies such as Companies House. Intelligent automation and RPA tools can help decipher whether the address is actually in the location claimed by the potential customer, while also being able to flag blacklisted accounts and fake businesses that have attempted to fraud companies previously.
Utilising the appropriate technologies provides both the opportunity for the credit team to identify bad actors and speed up the process of screening a potential customer. In turn, whilst this speeds up the weeding out of fraudsters, it also enables the processing of a greater number of genuine transactions, benefiting the business doubly.
The fraud threat in 2021
Pre-pandemic, a face-to-face meeting with a client in a physical location would have often been all that was needed to complete the screening process, but the remote working era of the previous year has made it infinitely more difficult to check a potential deal’s validity. Now more than ever, fraudsters are posing as employees of fake businesses on social media platforms and video conferencing to trick other businesses. It’s therefore vital in the modern age for assistive technology to be used to identify bad actors, and will remain so as numerous industries adopt a future flexible-working model and fewer transactions are made in-person.
Empowered by technology, credit teams and managers can play a key role in defending their business against evolving fraud threats. RPA and intelligent automation can compliment their competencies and enhance their role, rather than replacing them. The future of fraud is an uncertain landscape for credit teams, but utilising the right technologies can inform their decisions and protect their organisation from bad debt.
