How Accounts Payable Automation Reduces Fraud and Boosts Efficiency

Global research reveals that 77% of finance professionals now know someone who has been the victim of sophisticated account payables fraud in the last five years, up from 65% last year. The main reason? – The lack of AI adoption and the finance team’s under-preparedness.

Take the case of Sarah, CFO of a mid-sized manufacturing company. One morning, she was looking through vendor payments – two identical ones – each $ 60,000 in a row of two weeks to the same vendor. Something felt off. The vendor’s name was familiar, but she noticed a letter was missing from the email address on a closer look. A classic case of invoice fraud that went unnoticed in a rush.

This was a wake-up call for Sarah and a reminder that manual processes in AP are a fraudster’s playground. But here’s an interesting part. Companies are now starting to adapt AI to automate the whole process. And suddenly, the same technology that’s making payments faster is also making them safer. It’s this unexpected upside that nobody talks about.

Account Payable Automation – A Shield Against Fraud

Frauds and scams, particularly in the AP process, can lead to substantial financial losses and reputational damage for businesses. Account payables (AP) automation is emerging as an effective tool for businesses seeking to boost operational efficiency and prevent financial risks. Its ability to combat fraud is one of the most crucial benefits.  

Trustpair’s recent research states, that 36% of companies that experienced fraud attacks suffered an average financial loss of more than $1 million and 25% of them suffered an average loss of more than $5 million. This underscores the critical need to automate the payment process for businesses. 

Here is how AP automation helps businesses to prevent fraud:

• AI-Powered Invoice Matching

Accounts payable (AP) automation software uses artificial intelligence and machine learning-based three-way invoice matching. In this, invoices are cross-checked with purchase orders and delivery receipts. And the system automatically flags inconsistencies before processing the payment. Unlike manual processes, fraudsters cannot easily exploit businesses using fake invoices. 

AvidXchange’s recent survey – “ The State of B2B Payment Security in 2024” reveals that 75% of AP leaders using automation have stated that the system has helped them prevent payment fraud and significant financial losses. 

• Automated Multi-Level Authentication and Pre-Set Approval Workflow

With the automation of the accounts payables process, every invoice and payment goes through multi-level authentication to prevent any unauthorized transaction. There is no question of human oversight, as the authentication follows a pre-set approval workflow. Only authorized personnel can access (role-based access) and authorize the payments and the multi-level approval adds a layer of protection. 

AvidXchange’s 2024 survey on the state of B2B payment security reveals that 62% of businesses have used multi-factor authentication to prevent fraud while 53% of them relied on role-based access. 

• Real-Time Fraud Detection

AP automation software analyzes the spending pattern on a real-time basis, identifies suspicious transactions and flags unusual payment patterns and duplicate invoices. Machine learning and generative AI used in AP automation help businesses receive real-time alerts on fraudulent transactions. For instance, pioneers in financial automation like Serrala and Coupa, provide excellent fraud management solutions with AP process automation.

AP automation system also verifies vendor details and reduces business email compromise (BMC) fraud. As per the FBI’s Internet Crime Report, the business email compromise (BEC) scam has cost companies over $2.7 billion in 2023 alone. 

Beyond Fraud Prevention – Boosts Efficiency Like Never Before

Though the fraud prevention benefit alone makes a strong case for automating the AP processes, the significant boost it gives to business performance needs to be highlighted. Businesses can substantially enhance their operational efficiency, and financial stability and be compliant-ready. 

Last year, Deloitte and Basware have partnered together, aiming to reduce invoice processing time by 80% and focusing on bringing down average processing time from ten days to less than a day. 

Here is how AP automation boosts operational efficiency and business performance:

• Reduced Cost

AP automation can lower per-invoice costs by reducing manual labor and reducing errors such as duplicate payments. A study by Forbes on AP automation reveals that companies using AP automation experience 81% lower processing costs. 

• Quicker Payments

AP automation accelerates invoice processing and makes payments faster. A study by Forbes on AP automation reveals that companies using AP automation experience 73% faster processing cycle times. Faster payments improve supplier relations, fostering a collaborative business environment and potentially leading to better terms and discounts

• Secure Audit Trail

Every transaction is automatically recorded, which makes it easy for auditors to trace back payments and review them quickly. Automation also helps businesses stay compliant with built-in compliance checks. 

Conclusion

With the rise of AI, machine learning, and cloud-based solutions, AP automation is becoming the backbone of financial operations. You might wonder what it means for those behind the AP processes!  It means preventing fraud and boosting efficiency in ways that were previously unimaginable.

Ardent Partners’ latest report, “The State of ePayables 2024: Money Never Sleeps,” paints a vivid picture of this future. It predicts that within the next 12 months, a staggering 76% of AP operations will be AI-driven. That makes one thing very clear: AP automation isn’t just a trend; it’s a necessity.