Ways to Identify

ACCOUNTS PAYABLEFRAUD

Internal accounts payable controls is quite the tedious tasks but upon

doing such measures the results are worth the effort and could

foresee fraud or leakages before it threatens the business.

These few approaches is a combination of data mining and

programming capability but the implementation is satisfactory and

fairly straightforward.

Duplicate Payments

. Implement some fuzzy-matching

Rounded-Amount Invoices

Invoices just below approval amounts

Check Theft Search

Duplicate payments may not be considered as fraud-related, but continue to be a significant A/P leakage which could be

prevented and recovered.

Duplicate Payments

Duplicate Payments

For some it may not be much but if the corporation A/P invoices accumulates a total

of $75 million and the duplicate payments could be around $1.5 million.

2%

states that corporations makes around

DUPLICATED PAYMENTS.

Solution

Acquire software packages to handle duplicated invoices though this may still be vulnerable to duplication due to an addition of a single letter among the information added will lead to duplicated transaction.

Duplicate Payments

The programmer will then handle the limitation through code creation to join tables and match data through ids then retrieve the results for A/P invoice duplication.

Duplicate Payments

Ask a programmer

It would be best to implement “similar” fuzzy-matching than an exact matching.

Implement some fuzzy-matching

Implement some fuzzy-matching

Striping out the zeros, any alphabetic characters as well as punctuation characters

Invoice number

Invoice Date

Implement some fuzzy-matching

For effective use of such method, we recommend on using setting it to 21 days to fully catch duplicate payments made 3 weeks apart.

Date difference is between less than the designated amount such as 7 days

Amounts are considered similar if it is under

these three criteria:

Implement some fuzzy-matching

If the amount is 5% +/- than the other amount If an amount is exactly twice the amount as the other,

i.e. $220.15 and $440.30 If the amount has the same first 4 digits, i.e. $123.45

and $1,234.55

Conclusion:

Implement some fuzzy-matching

It would be ideal to use similar matching in the invoice number, date, and amount fields when conducting a payment audit. This will assure you of a shorter and more accurate report.

Rounded-Amount Invoices

It was found that frauds could be done through rounded amounts, these are invoices without pennies.

Rounded-Amount Invoices

One trick you could do is by using the function MOD in excel. The function MOD could tell whether the amount is rounded invoices by giving a result of 1 if the amount is in decimal format and 0 if it is a rounded-amount.

Sample: MOD(150.17,1) which will result to 1 indicating an amount with decimals.

Rounded-Amount Invoices

Rank the vendors according to the percentage of the rounded-amount invoice.

• To do this, simply add up the

vendors’ number of rounded-

amount invoices then divide the

sum to the total number of

invoices for that vendor.

Sum of vendors’ number of

rounded-amount invoice /

total number of invoices of the

vendor

Then rank it by descending order to review the most suspicious vendors first.

N%=

Invoices just below approval amounts

Suppose an A/P clerk knows the different dollar threshold for the management approval.

A good example would be, If the supervisor would only accept invoices exceeding an

amount of $3,000 or less, while the manager could allow to approve invoices of

$10,000 or less. A good situation would be, when the manager or the supervisor

tries to skim off extra money. This could be done by creating an invoice just below

the approved level of amount.

Invoices just below approval amounts

This kind of suspicious activity could be tracked through a simple method of having a 3% (or less) than the approval amount to be

identified.

For example if the approval amount is $3,000, then if the invoice is between $2,910 and

$2,999. This could be flagged as suspicious and consider as an anomaly

Check Theft Search

Identify discrepancies among the accounts payable monthly bank statement.

Check Theft Search

Missing check number or gaps in reconciled checks numbers.

Determine this by checking number is not sequential with reference to the ‘*’ or

‘#’

Check it through merging your check register, A/P file, and back statements to

together.

Identifying discrepancies through:

Check Theft Search

Upon doing so will lead to identification of stolen checks.

If possible, check the OCR (Optical Character Recognition) abilities, to be able

to identify the actual payee.

Identifying discrepancies through:

Check Theft Search

As presented, you have 3 data bases describing 1 activity at hand. Upon the presence of these data, the programmer will be in charge of joining the tables to get the needed information.

Check Theft Search

Then, use the unique numbers and merge it in the 3 data sources and compare these details: payee, check amount, check date. Now, identifying the checks will be easy through this created technique.

Be safe and be aware of your accounts payable. If situations such as

these could not be handled by the in-house team, it would be best to

ask assistance from an outsourced accounting services.

Your trusted outsourced accounting provider in the Philippines. Give

them a visit here: http://www.infinitaccounting.com/