Daniel Ball, SVP Innovation at Medius
Fraudulent activity in the workplace is not stopping any time soon. According to a recent study by UK Finance, workplace criminals have stolen a whopping £609.8 million in the first half of 2022 alone, through authorised and unauthorised fraud and scams. The height of the pandemic resulted in the creation of decentralised, work security systems through remote working conditions, providing the very climate for fraudsters to infiltrate payment processes, exploit private data and ultimately syphon-off funds.
Furthermore, as businesses in the UK struggle with soaring inflation and the cost-of-living crisis, businesses are now operating in a post-pandemic, cash-saving mode, bringing issues of effective cash flow management and supply chain efficiency to the fore.
Whilst businesses will take a great many steps to alleviate financial pressures in the aftermath of a global health crisis – and a current global financial crisis, many finance professionals are missing a cost-saving opportunity right under their noses – payments fraud. We know payments fraud is a huge drain on businesses. The latest Financial Census(https://www.medius.com/financial-census/) surveyed 2,750 global finance executives, including 501 finance executives in the UK – and discovered that UK businesses lose on average over £290,000 each year to invoice fraud.
Shockingly, 1 in 5 finance professionals are unaware or unable to even estimate the cost of invoice fraud to their business, which is particularly concerning in an economic downturn. Additionally, many finance departments struggle to source where the fraud-risk areas are within their businesses.
AP Automation is a game-changer when it comes to cost-cutting and creating a channel of visibility when it comes to invoices, spend and cash flow – all of which is necessary in the current economic climate. So what can businesses do to tackle this burgeoning issue head on? Here are three tips to help Finance and IT teams identify and reduce workplace fraud.
1. Validate important supplier data
In a fast-paced workplace with multiple moving parts, it’s very easy to neglect the details. However, overlooking the small print provides the perfect conditions fraudsters need to syphon company funds into their back pockets. To mitigate or prevent this, Finance and IT departments can vet their suppliers using technology.
This starts at the very beginning: from supplier initiation, verifying all contact information – including supplier tax identification numbers – all as part of the supplier onboarding process. But it doesn’t end there. Businesses must continue to pay attention to the details through ongoing data analysis – via AP Automation – into business models. This is crucial to spotting anomaly or unauthorised payments and unusual transaction timings.
2. Create a system of checks and regulations
Creating a robust security system will significantly benefit businesses in the long run. Human error is real and stressed and stretched employees are more likely to let fraud slip through their fingers. Additionally, limited resources and high talent churn, particularly in a post-Covid, pre-recession world means that companies can’t realistically monitor every aspect of payment transactions. Automation is a lifeline here. Reducing the administrative burden on employees and adding an extra layer of security, which automatically flags new and unfamiliar payments – all in real time.
3. Use anomaly detection technology
Keeping a step ahead of fraudsters is a game-changer. Whether fraudsters are from inside or outside a business, technology can help catch fraud and build a robust system which can differentiate between legitimate and illegitimate payments – identifying duplicate transactions, and unusual payment patterns. Automated anomaly detection systems can also be tailored to recognize verified transactions and who authorises payments. This helps finance and IT teams instantly spot red flags and identify potentially fraudulent activity.
While fraudulent activity is by no means a new threat for business, it is likely to steadily grow over the next two years as the UK heads into a recession. Fraudsters will be able to take advantage of changing economic headwinds and seek new opportunities for fraud as businesses face increased daily pressures, ranging from spiralling and ever-changing costs for resources, to supply-chains in flux, and staff who are struggling to cope with rising demands from businesses.
This will put pressure on businesses to constantly re-evaluate their system of checks and balances at the same time as implementing cost-cutting strategies, to stamp out fraud and prevent the huge financial toll this has. For businesses to not only survive, but thrive during these uncertain times, they must fine-tune their back office processes, strengthening their entire operation through increased transparency, and the effective management of cash flows aided by technology.