Reduce Risks and Streamline Your AP Team

Written by Milly Long

Risk is an inherent part of processing in Accounts Payable and the broader Procure-to-Pay cycle, but many of these risks can be avoided with the right approach. Taking preventative steps will help to avoid errors, fraud, and compliance issues.

Record Errors with Reason Codes

Reason codes are designed to ensure that errors are coded and recorded correctly. Your team should be shown that the codes used to record errors helps ensure that future compliance is met. For example, AP invoice policies relate to information such as invoice number formats. When you use error code codes to record non-compliance with these policies, it will enable you to determine which vendors are not adhering to policies the most, or if they’re involved in manual data entry, which team members make the most errors.

Furthermore, the codes will eventually enable you to identify trends and this will enable you to take the necessary course of action to make more significant process improvements.

Following Standard Practice

Statement reconciliation was once standard practice but a drop in team members has resulted in this important process being overlooked. It should be carried out on a monthly basis. But with time constraints in place, teams have found it difficult to keep it up.

What you should do is make sure that as a minimum, you analyse your top 20 vendors. Although this takes time, it makes it possible to identify priority errors or anomalies. However, the good news is that reconciliation can be outsourced – and that’s what really drives teams to make this happen each month, it saves time and returns cash to the bottom line.

Cross-Department Working to Avoid Fraud

If you want to avoid the risks of fraud, overpayment issues, and sanction breaches, then routine master vendor file analysis is crucial. AP teams have a vast amount of knowledge on vendors and so they should take control of this process while working closely with other departments such as Internal Audit and Procurement. This makes it possible to implement a multi-layered protection process.

Vendor activity analysis will provide clear insight, and this will enable AP to deactivate vendors that have not been used within a certain period or pose an immediate risk. What this means is that you should use supplier risk intelligence software to forensically analyse suppliers and their transactions continuously, to ensure you identify and manage all anomalies in a proactive way. With the right solution, it makes it possible to avoid this becoming a complex and time-consuming task that requires a lot of effort.

Continuous, proactive checking enables your AP team to stay ahead of problems as opposed to having to react to problems after they occurred. What this means is that teams should carry out continuous checking of vendors – this can include their address, name, bank account numbers, and other firmographic information, as well as whether the supplier is on a government or security service sanction list, or has commonality with an employee.

For AP teams to optimise their performance and become best-in-class, there are tools and processes available to them. By using these, it makes it possible to avoid problems, errors, and fraud while remaining efficient and streamlined.

This blog is one in a series covering ways to improve Accounts Payable and Procure-to-Pay operations through forensic-level, AI-powered risk detection and prevention. To read the full report, click here.

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