[Webinar] Fraud and Other Shenanigans in Accounts Payable

Fraud and Other Shenanigans in Accounts Payable

Mary SchaefferPublisher & Editorial Director AP NowAuthor Fraud in Accounts Payable: How to Prevent It + 15 other business books

25 Ways Crooks Steal Your Organization’s Money and How You Can Stop Them

Agenda

IntroductionInvoice FraudCheck Fraud e-FraudP-card Fraud T&E FraudClosing Thoughts

Introduction

The honest mistake issue

It happens at every organization

Fraud comes in two flavors

The Good, Bad & UglyThe Good news: You can deter

The Bad news: Not a one-time fix

The Ugly news: Fraudsters smart and sophisticated

Deter, prevent, detect

Invoice Fraud

#1 Phony Invoices

Yellow pages ads, copier toner, help-wanted

A word about billing noticesItems that skirt the law

Look like invoices (really)

#2 Inflated Prices

Vendors knowingly charge higher prices than agreed toDifficult to prove

Solution: 1) Complete Pos2) Line item matching – automation a big

help hereIdentify vendors

#3 Unauthorized Charges

Vendor charges for freight etc. that was supposed to be included

Difficult to prove

Solution:

1) Complete Pos2) Line item matching – automation a big

help hereIdentify vendors

#4 Duplicate Invoices

Invoices submitted a second time with the intent of getting the vendor to pay twice

SolutionInvoice number controlCheck for duplicate payment amountsRely on approver

#5 Suppress Credits

Vendor statements with credits suppressed

Solution: 1) Use best practices so credits not created2) Request statements and follow up on a

timely basis3) Hire an audit firm

#6 Checks Intended for Others

How:1) The Master Vendor File Scam2) The Return to Requisitioner Scam3) Honest mistake

Solutions1) Good controls on MVF 2) Reports on changes3) Don’t return checks to requistioners4) The form for returned checks

#7 The Credit Hold ScamThe threat of putting the organization on

credit hold unless an invoice is paid NOW

Solution:1) Don’t over react2) Double check before blindly issuing the

payment3) If payment is made, close the PO and

extinguish the receiving docs

Check Fraud

#8 Phony Checks: Your Bank Info

PhysicalElectronic; Internet orders

SolutionPositive pay for physical checksDaily reconciliations of bank accountsSeparate account for refund checksACH blocks, filters

#9 Same Check; multiple copies

Mostly a payroll problem

Solution: Positive pay

Better Solution: Payee name positive pay

Best Solution: No checks – all on direct deposit

#10 Stolen Checks: Payee Name Changed

Example of how crooks are getting smarter

Solution: Payee name positive pay Direct deposit

Electronic Fraud

#11: Positive Pay RejectsResubmitted as ACH debits

Solution:1) ACH blocks, filters2) Daily bank reconciliations3) of course, positive pay

#12: Unauthorized ACH Transactions

Can be debit or creditSeveral variations

SolutionsACH blocks, filtersDaily bank recsSeparate computer for online banking

#13: Corporate Account Takeovers

How they work

SolutionsSeparate computerCareful with attachmentsCareful clicking on linksCareful even with legitimate looking emailsBetter updating of contact info

#14: Ridiculous e-mailsThe ones that scream scam

SolutionsObviously, don’t respond

DO NOT CLICK ON ANY LINK IN THEM – just to see

#15: Serious Looking EmailsExamples

Includes NACHA, FBI, Feds etc.Your ACH payment has been returnedLooks like it came from your bank

SolutionsKeep contact info updated – and verify

separatelyDon’t click on anything!Separate computer

#16: Change of Bank Account Request

Variation on the change of Remit-To address request

SolutionsVerify separatelyGet contact info when setting up master

vendor fileKeep contact info updated

P-card Fraud

#17: Unauthorized Spend

Could be for personal useCould be for items not authorized

Solutions: Guidelines - detailed Cardholder agreement Manager review

#18: Charges just under the Limit

Trying to get around authorization limits Trying to get around other restrictions

SolutionDetailed policyRun reports identifying such chargesTalk with purchaser and/or sup

#19 Spending by Terminated Employee

100% preventable!

Solution:1) Get card back2) Immediate notification by HR3) Cancel card at bank ASAP

T&E Shenanigans

20: Outlandish Spending

$800 leather skirt$300 bottle of wine$50 steak etc.

Solutions:1) Detailed policy setting guidelines2) Make managers responsible3) Warnings

#21: Adding a Gift Card

Newest T&E fraud

Solutions:1) Detailed receipt2) Refuse to pay3) Level 3 data

– if T&E combined on p-card

#22: Going the Extra MileSubmitting extra miles for reimbursement

Solutions:1) reasonableness2) Mapquest etc. to estimate3) Feature in newest T&E software4) Make managers responsible

#23 Double DippingSubmitting an expense twice

Same receiptT&E, invoice, p-cards

Solutions(not easy) – same amount on different

reportsThe 14-month searchDuplicate payment audit – might findManager reviewQuestion items paid out of the norm

#24: Personal GuestsClient or significant other?IRS Guidelines

Solution - partial1) Detailed receipts2) Manager’s oversight

#25: Employees’ Eat out on Employer’s Dime

How? Lower level employee submits the bill

SolutionStrict guidelines

Higher level employee submitsNo one approves a function they attended

Automated T&E

Closing Thoughts

Crooks creativeStay on top of the issue

Detailed policy, strong internal controls, appropriate segregation of duties and automation will help prevent and detect many frauds.

Thank you/Questions

Questions always welcome.To share your thoughts and insights

Mary Schaeffermarys@ap-now.com

302 836 0540

Sign up for our free weekly ezine atwww.ap-now.com/ezinesignup.html

About Mary Schaeffer Mary Schaeffer is a nationally recognized accounts payable expert. Following a career

in finance she turned to writing and consulting. For the last 15 years she has been researching and writing newsletters for the accounts payable profession. Currently she is the Editorial Director & Publisher of Accounts Payable Now & Tomorrow, (www.ap-now.com) a fee-based newsletter published by CRYSTALLUS, Inc.

She also handles most of the firms consulting assignments (focused primarily on AP issues) often working with other well-regarded professionals. Her blog, at http://ap-now.com/blog/ is read by over 15,000 professionals each month.

Ms. Schaeffer is the author of over 15 business books including The CFO and Controllers’ Guide to Accounts Payable and the recently published Fraud in Accounts Payable: How to Prevent It. John Wiley & Sons is the publisher of most of her books.

She also is a regular contributor to the AICPA’s Corporate Finance Insider.

Ms. Schaeffer has a BS in Math from York College (CUNY) and a MBA in Finance from New York University.

She can be reached at marys@ap-now.com

“75% of enterprises use a fully manual indexing and approval process.” – Aberdeen Group

It’s time to Let Go and Gain Control. Automate your Accounts Payable.

and Mary S. Schaeffer38

[Webinar] Fraud and Other Shenanigans in Accounts Payable

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