As a hub for moving money and data through an organization, accounts payable (AP) is a tempting target for accounting fraud. No business, regardless of its size, is immune to the risks. According to the Association for Financial Professionals (AFP), 78% of businesses have been impacted by payments fraud.
Fraud can originate from inside or outside a company. And without proper controls, it's even easier for companies to be exploited. Whether or not fraud occurs, the accusation of fraud alone can cause severe reputational damage.
Businesses are more vulnerable to fraud when AP is managed manually. This is because companies cannot easily put safeguards in place to detect fraudulent activities — whether that's false billing, fraudulent payments, or unapproved vendors.
In this blog post, we'll discuss some common AP fraud risks and demonstrate how AP automation solutions like Quadient AP by Beanworks protect organizations both large and small.
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Internal and external AP fraud
Companies lose billions of dollars every year to internal and external instances of AP fraud. Over 71% of organizations acknowledge that manual data entry and inefficient processes are the top pain points for their company, not to mention the most vulnerable points for AP fraudsters to attack.
Here are some common types of internal and external fraud:
Internal fraud:
False billing: This is when false invoices are created for self-payment. In this type of fraud, we generally see an employee working independently, or in collusion with an external party.
Fraudulent payments: This is when an employee makes unauthorized payments, usually via check or ACH.
Tampering with financial reporting: This happens when an employee makes unapproved changes to financial data after payments have been processed.
External fraud:
Phishing scams: This happens when an external party fraudulently tries to gain access to sensitive information such as credit card, PIN, financial information or passwords. Companies should also be wary of unsolicited emails asking for private or personal information.
Duplicate payments: This is when vendors are paid more than once for the same invoice, due to receiving the same invoice in different formats or because of employee error.
Unapproved vendors: This happens when a payment is made to a fictitious or unauthorized vendor for non-existent or fraudulent goods and services.
How AP automation reduces risk
Many organizations feel like they're at a crossroads – needing to choose between simplicity and security. But this couldn't be farther from the truth. Robust and customizable AP automation solutions provide the technology for strong, secure internal controls, helping protect both the business and the employees that work there.
Here's how Quadient AP's automation solution reduces your risk:
- Automated approval processing: Quadient AP automates invoice routing so that organizations can track an invoice throughout its journey – from submission, to approval, to payment – including dates and employee names. By cutting out the paper process and enabling the workflow to be managed online, comprehensive approval controls deliver reduced risk and an increase in transparency.
- Digitized reporting and auditing: Quadient AP's digitized reporting and audit functionality reduces AP fraud risk by tracking erroneous payments, payment validity, vendor discrepancies, and any other inconsistencies. It also provides tools to monitor spend – helping organizations monitor and forecast cash flow. And by putting all of these elements in the cloud, audits become faster and easier, providing insight into financial data before threats can take hold.
- Customized and improved visibility: Quadient AP enables separate roles for invoice routing, approval, and payment. This separation blocks internal fraud by preventing payment from getting released without verification from multiple individuals.
- Safer payment methods: 63% of organizations have faced fraud through paper-based checks. Quadient AP enables electronic payment methods, including virtual credit cards, ACH, and wire payments. This not only eliminates fraudulent opportunities such as check forging, but it also eliminates human error with payment batching and automated 3-way matching to confirm the validity of payments before processing.
- Integrated software opportunities: Quadient AP integrates with many accounting systems such as Sage, Quickbooks, Netsuite, and Microsoft Dynamics. This integration empowers businesses with real-time data access, seamless approvals, and enhanced transparency throughout the AP workflow.
Free Download: How to track, benchmark, and improve your Accounts Payable KPIs
Quadient AP can reduce your common AP risks
Quadient AP incorporates scalable, secure controls into all elements of your AP workflow, discouraging internal fraud efforts, while tightening up security against external fraud.
Book a demo with us today to see how Quadient AP helps reduce your common AP fraud risks and empowers your AP team to do their best work.
