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UK SOx law: How does it impact accounts payable?

We explain what UK SOx is, how changes to the law will impact organisations in the UK, particularly for accounts payable, and how to prepare for those changes.
Gavel on a table, to signify the UK SOx legislation

What is UK SOx?

UK SOx is the informal term used for the Corporate Governance Regime, the 2024 edition of the UK Corporate Governance Code. Named because of the similarity to the U.S. Sarbanes-Oxley (SOx) Act, it aims to strengthen corporate governance standards across the UK. To this end, the UK Government established the Audit, Reporting and Governance Authority (ARGA).

The UK Corporate Governance Code 2024 focuses on financial disclosure requirements and internal control measures, and is designed to give more control around audits, increase transparency for shareholders, ensure accurate reporting, identify risks sooner, and prevent fraud. It is due to come into effect as of January 2025.

Who is impacted by UK SOx?

According to the Financial Reporting Council website, the regulations are applicable to premium listed companies on the London Stock Exchange.

How will it affect AP departments?

The legislation will cause board members in an organisation to take a deeper look at their financial reporting, and the aspects of what they need to report. The guidance on this covers audit risk and internal control, and that’s where it may affect the procure to payment process. It dictates that organisations should be establishing and maintaining an effective risk management and internal control framework. It’s therefore important to review current risk management controls and ensure they are stringent.

The business will ask; are we doing enough in our internal controls to satisfy the regulations? If it is decided your organisation is not doing enough, plans will be made to rectify it. That can include implementing a new way of working, automation, or software. For example, it is explicitly stated in the guidance that ‘given their size and complexity, FTSE 350 companies should consider having an internal audit function.’ Fraud is also brought up specifically as an example of material controls, insinuating that this is an important area that shouldn’t be overlooked, and that strong fraud controls should be in place.

How can you prepare for UK SOx?

We recommend first preparing for UK SOx by first creating a risk and control matrix for your accounts payable controls. It’s important to look at fraud, accuracy, overpayments and optimising your team’s time.

Some of our US friends have told us that regular statement reconciliation is extremely helpful to comply with SOx. It ensures your ledgers are accurate and that you have an internal control in place to guard against fraud and other errors. Now, we know that this is a daunting task when you have a huge supplier file, but with the right automation, you could be reconciling most of your suppliers every month.

How FISCAL helps your internal fraud and risk controls.

FISCAL provide AI-based software which continuously checks your suppliers and transactions against an array of criteria and alerts you immediately if it finds risks. This is designed to safeguard your organisation against risks, including fraud.

Our software is a thorough control to ensure transaction accuracy, checking every invoice, and every supplier. This in-depth scrutiny helps to streamline the audit process and reduce workload, as finding these discrepancies is completed before the payment run and is part of that final checking procedure.

The software detects a broad range of errors and anomalies. In transactions, these include duplicate invoices and fraud identifiers, like suspicious invoice entry times, duplicate suppliers, and dubious figures.

As previously mentioned, statement reconciliation is an important measure to ensure ledger accuracy, and to find missed overpayments, credits or rebates. Our automated solution matches a statement in as little as 7 seconds, and with bulk upload functionality, saves time so your team can correct exceptions quickly.

The software also retains a full audit trail, showing changes, dismiss actions and more.

A screenshot of the FISCAL software, showing transactional risk, a control to alleviate missed risks in 3-way matching
FISCAL Technologies software identifies fraud and other AP risks, allowing your team to solve them before payments are made.

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