How to Detect Payment Fraud
Updated on Wednesday 22nd February 2023
Many companies in different industries have to deal with various types of frauds, however, the ones causing most of the damage are those that lead to significant financial losses.
Frauds in the accounting department are by far the most common in our days, which is why many business owners try to prevent them. While some of the issues can be solutioned with a lot of attention from the personnel, others cannot be detected in time because fraudsters have adjusted their way to operate to the new technologies.
In order to prevent such damages, a payments fraud detection software can be a good solution to one of the biggest challenges companies face. At PAIDAnalytix, working on such solutions to the benefit of our clients is a priority.
Below, we present to you our payment fraud protection solutions.
Most of the frauds that happen nowadays target the accounts payable department which handles all the invoices and other financial documents that are easy to access and alter to the benefit of a fraudster.
Some of the most common accounts payable fraud usually relate to:
Trying to fix such problems the old way, where the financial documents are single-handedly verified by the personnel not only that will take a lot of time, but some of the issues cannot even be found. This is why an automated payments fraud detection method is a better option.
If you decide to use our solution, an accounts payable audit will also be provided in order to verify the strengths and weaknesses of your accounting department.
There are various ways in which a business owner can detect one or more accounts payable frauds, however, when choosing a solution, the key aspect is how soon can these issues be discovered. This is where Artificial Intelligence can be quite reliable because it works much faster than the human mind.
Accounts payable frauds will usually raise some red flag, among which the ones mentioned below are the most common:
These are some of the red flags an accounts payable fraud can raise, and if some of them can be handled by the personnel, among which those related to complaints or irregularities related to addresses that can be noticed by employees, invoicing-related ones will be harder to track down. One of our solutions refers to accounts payable audits. This is an automated tool that can be used to identify various issues within the payment process. However, it is also employed to detect the accuracy rate of payments made, as well as other metrics a business owner wants to measure.
One of the most common ones is that where a large company was cheated into paying invoices into a new bank account without checking the new instructions. This is a situation where a payment fraud protection program can help by pointing out the old and the new bank account number and trigger additional verifications.
Duplicate payments can occur for various reasons. Most of the times, these occurs when sending two checks for the same amount to the same vendor, double electronic payments made by mistake, but also unlawful reasons can stand at the base of such a problem. In order to avoid them, there are various measures that can be taken, such as using an automated detection software. An AI-based payments fraud detection software is also one of the best solutions when seeking to reduce financial losses.
Preventing fraud requires a lot of attention from all the persons who deal with invoices – from those to receive them, to those who process them and those who make the payments – which is why this a difficult task. However, looking into each transaction and verifying any suspicion will help prevent most of them.
This is also where a payment fraud prevention software can help strengthen control over the accounts payable department.
According to many studies conducted by financial companies and magazines, it seems that:
For information on our payments fraud detection solution, please contact us.
Article by:
Radu Fertonea is the founder of Paid Analytix and Senior Manager with Executive MBA degree (Maastricht School of Management). He was director of operations at Societe Generale European Business Services, in charge with: Management of the Source to Report practice (Procurement, Accounts Payable, Accounts Receivable, Management Accounting) | Global redesign of end-to-end source to report activities | Consolidation of the Finance exercise for the European operations of Société Générale (100% coverage target by 2020) | Transition Management, Process Standardization and Continuous Improvement | People Management – team of 150+. With a broad experience in the financial field and after working with large societies which handle thousands of payments every year, came up with the idea which led to the creation of Paid Analytix.
Frauds in the accounting department are by far the most common in our days, which is why many business owners try to prevent them. While some of the issues can be solutioned with a lot of attention from the personnel, others cannot be detected in time because fraudsters have adjusted their way to operate to the new technologies.
In order to prevent such damages, a payments fraud detection software can be a good solution to one of the biggest challenges companies face. At PAIDAnalytix, working on such solutions to the benefit of our clients is a priority.
Below, we present to you our payment fraud protection solutions.
Frauds that are usually related to the accounting department
Most of the frauds that happen nowadays target the accounts payable department which handles all the invoices and other financial documents that are easy to access and alter to the benefit of a fraudster.
Some of the most common accounts payable fraud usually relate to:
- check frauds where such payment methods are used,
- bank transfer frauds where the bank account number is replaced with a different one and important amounts of money are diverted,
- billing schemes through which false payments are generated by third parties (however, these can also occur with the help of employees),
- corporate bribery and expense frauds are also on the list of common accounts payable deceits.
Trying to fix such problems the old way, where the financial documents are single-handedly verified by the personnel not only that will take a lot of time, but some of the issues cannot even be found. This is why an automated payments fraud detection method is a better option.
If you decide to use our solution, an accounts payable audit will also be provided in order to verify the strengths and weaknesses of your accounting department.
How can account payable frauds be detected?
There are various ways in which a business owner can detect one or more accounts payable frauds, however, when choosing a solution, the key aspect is how soon can these issues be discovered. This is where Artificial Intelligence can be quite reliable because it works much faster than the human mind.
Accounts payable frauds will usually raise some red flag, among which the ones mentioned below are the most common:
- unknown or unusual vendors or suppliers’ names appear on invoices,
- increased sums of money that are paid to certain suppliers against the same services or merchandise,
- large payments made to a single vendor or supplier,
- large company purchases completed by an unauthorized party,
- abnormal invoices (photocopied invoices or that look unprofessional or miss various elements),
- supplier email and addresses that look suspicious,
- duplicate payments made to the same vendor,
- clients or vendors’ complaints.
These are some of the red flags an accounts payable fraud can raise, and if some of them can be handled by the personnel, among which those related to complaints or irregularities related to addresses that can be noticed by employees, invoicing-related ones will be harder to track down. One of our solutions refers to accounts payable audits. This is an automated tool that can be used to identify various issues within the payment process. However, it is also employed to detect the accuracy rate of payments made, as well as other metrics a business owner wants to measure.
One of the most common ones is that where a large company was cheated into paying invoices into a new bank account without checking the new instructions. This is a situation where a payment fraud protection program can help by pointing out the old and the new bank account number and trigger additional verifications.
Duplicate payments can occur for various reasons. Most of the times, these occurs when sending two checks for the same amount to the same vendor, double electronic payments made by mistake, but also unlawful reasons can stand at the base of such a problem. In order to avoid them, there are various measures that can be taken, such as using an automated detection software. An AI-based payments fraud detection software is also one of the best solutions when seeking to reduce financial losses.
How to prevent accounts payable fraud
Preventing fraud requires a lot of attention from all the persons who deal with invoices – from those to receive them, to those who process them and those who make the payments – which is why this a difficult task. However, looking into each transaction and verifying any suspicion will help prevent most of them.
This is also where a payment fraud prevention software can help strengthen control over the accounts payable department.
The most common accounts payable frauds
According to many studies conducted by financial companies and magazines, it seems that:
- vendor invoicing and false billing accounted for 14% of the cases surveyed by a study in 2017,
- these have led to losses of 42% to the companies in question,
- the same study indicates that in 22.1% of the cases check fraud was the main cause of the losses.
For information on our payments fraud detection solution, please contact us.
Radu Fertonea is the founder of Paid Analytix and Senior Manager with Executive MBA degree (Maastricht School of Management). He was director of operations at Societe Generale European Business Services, in charge with: Management of the Source to Report practice (Procurement, Accounts Payable, Accounts Receivable, Management Accounting) | Global redesign of end-to-end source to report activities | Consolidation of the Finance exercise for the European operations of Société Générale (100% coverage target by 2020) | Transition Management, Process Standardization and Continuous Improvement | People Management – team of 150+. With a broad experience in the financial field and after working with large societies which handle thousands of payments every year, came up with the idea which led to the creation of Paid Analytix.
