Most times, organizations will endup paying to suppliers that don’t exist. The accounts payable team received an invoice for goods never purchased. While another executive bought IT equipment with company funds and sold privately for profits. Yes, there are real stories happening for various reasons. However, in the business world, it is very difficult to avoid – fraud, the dirty secret of the business.
Fraud ends up costing companies around 5% of annual revenues each year. It is believed that internal controls were responsible for 50% of fraud instances. That’s not good news for mid-size businesses that have few controls and huge cashflow concerns. However, if fraud is slipping through the cracks, it is important to control it. Employees, customers, vendors and other sources play the key role in identifying fraud.
Why Most Fraud Control Methods Fail?
With so many ways to commit fraud either intentionally or accidentally, it is difficult for businesses to combat fraud. Audits are a very common method to spot fraud, but they can’t always identify the fraud. You can audit every transaction from purchases to invoices, but this method doesn’t guarantee accuracy.
You can save time by auditing transactions randomly to find any fraudulent transactions. However, audits are very manual, whether you do it or outsource the task. So, what’s the best strategy to fight fraud? Technology can be a solution to this. Automation can easily identify fraud that happens within the process and that result in huge revenue loss. Machine learning can take a look at the user’s spending across the entire organization to identify suspicious activities. The capability of looking up for fraud in a comprehensive way is important as employees may find numerous ways of committing fraud.
Around 77% of fraud comes from accounting, operations, sales, customer service, and administrative support and financial operations. It is critical to get all the spend information from multiple departments from a single platform. Certainly, this is one of the best ways to control procurement fraud across organizations.
Leverage AI-powered Audits
By leveraging today’s technology, you can prevent fraud instead of detecting by comparing fraudulent behavior at a granular level and identifying potential fraud activity. Artificial intelligence can aggregate the data and analyze billions of transactions to identify and flag anomalies for your finance department to review. This approach can avoid fraud effectively than traditional audit processes while freeing up resources to focus on company strategy.
Using AI-powered procurement solutions can help you combat fraud and prevent every dollar from slipping through the cracks.