Accounting fraud and invoice fraud: Protecting your organization from billing fraud schemes

Accounts Payable Fraud in 2024

According to the 2024 PwC Global Economic Crime Survey, 41% of organizations have experienced fraud, specifically procurement fraud, in the past 24 months.

Organizations are looking for ways to reduce fraud risk. Rillion can help companies reduce fraud by saving time and money, provide a time-stamped audit trail, reduce manual error and missing invoices, and control maverick spending.

The Accounting Fraud Triangle: Fake Invoices and Fraudulent Schemes

The Accounting Fraud Triangle, a concept developed by Donald Cressy, argues there must be a reason and  motivation behind what drives fraudulent behaviour. The 3 areas it focuses on are Pressure, Opportunity and Rationalization.

An expanded version of the Fraud Triangle was introduced in 2004 by Wolfe and Hermanson, called the Diamond Triangle. The factors in this model are Incentive, Opportunity, Capability and Rationalization. There’s an excellent history and explanation of both of these concepts here.

The latest research into procurement fraud is in PwC’s 2024 report: Meeting tomorrow’s challenges, embracing risk intelligently (2024 PwC Global Economic Crime and Fraud Survey)

Here are some of the key takeaways:

• Procurement fraud remains a major concern: Cited by 55% of respondents as a widespread issue, with a significant number reporting it as one of the top three disruptive economic crimes.
• Technology has untapped potential to identify fraud: 20% of companies do not use data analytics in any way to identify procurement fraud.
• Challenges in risk management: Many organizations still struggle to perform comprehensive fraud risk assessments, with only 59% conducting them globally.

There are many ways Rillion can help reduce the potential for fraud:

Improved control: Automation provides greater visibility and control over the accounts payable process, enabling companies to track invoices and payments in real-time and detect any unusual activity. This helps identify and prevent fraudulent activity before it occurs.

For example, a case study of a global manufacturer found that automating the accounts payable process resulted in a 50% reduction in the time spent on invoice processing and a 75% reduction in the cost of processing an invoice.

Increased compliance: Automating the accounts payable process can help ensure compliance with regulations and industry standards, which can help reduce the risk of fraud and other illicit activity.

For example, a study of a large US hospital found that automating the accounts payable process resulted in a 50% reduction in the time spent on invoice processing, a 60% reduction in the number of errors, and a 40% reduction in the cost of processing an invoice.

Reduced reliance on paper: Automating the accounts payable process can help reduce the reliance on paper documents, which can be lost, stolen, or altered. This can help reduce the risk of fraudulent activity such as check fraud or invoice fraud.

According to a survey of businesses in the US, those who automated their accounts payable process saw a 70% reduction in the time spent on invoice processing, a 50% reduction in the number of errors, and a 40% reduction in the cost of processing an invoice.

Enhanced security: Automating the accounts payable process can help improve the security of financial data by using electronic data entry and validation, as well as by providing secure access controls and authentication. This reduces the risk of unauthorized access to sensitive financial information, a key factor in preventing fraud.

Automating the accounts payable process with Rillion reduces fraud by improving accuracy, increasing efficiency, and enhancing security and control.

See our whitepaper on preventing fraud in your organization: Top 6 Action Steps to Reduce Payments Fraud

People Also Asked

What are specific examples of fraud schemes that companies have experienced, and how were they detected?

Companies have encountered various fraud schemes, such as fictitious vendor setups, where employees create fake suppliers and approve payments. Other schemes involve altering legitimate invoices or misdirecting payments. These cases are often detected through routine audits, red flags in payment data, or whistleblower reports.

How can medium-sized businesses implement fraud prevention measures effectively without significant budget increases?

Mid-sized businesses can effectively implement fraud prevention measures without significantly increasing their budgets by using tailored AP automation solutions. These tools help streamline invoice approval workflows and ensure better control over payment processes.

Additionally, mid-sized companies can establish robust internal controls, such as setting thresholds for dual approvals on high-value transactions and segregvating duties to reduce opportunities for fraud. Providing ongoing training for staff on detecting fraud indicators and staying updated with emerging fraud tactics further strengthens their defenses.

What are the latest technological advancements in AP automation that help prevent fraud beyond basic automation features?

New technological advancements in AP automation include AI-powered anomaly detection, which identifies irregularities in payment patterns, and machine learning algorithms that continuously learn from transactional data to improve fraud detection. Blockchain-based solutions also offer secure, tamper-proof transaction records to deter manipulation.