Only last year, an accounts payable clerk from Rhode Island was convicted of accounts payable fraud. The worker redirected authorized funds from real suppliers and instead paid them into several of his accounts, totaling more than $300,000. Optimizing The accounts payment process can protect against fraud, and it can also prevent mistakes, and help scale your organization effectively. Learn the four key steps in the accounts payables workflow to build on your business’ procurement process.
Trustpair blocks accounts payable fraud thanks to ongoing and automated account validation processes throughout the payment chain. Request a demo to learn more!
Account Payables workflow: the 4 key steps
The accounts payable process can be a long one – especially when you’re spending time searching for suppliers, negotiating on product pricing, and have custom order requirements. However, in terms of paperwork, the accounts payable workflow can be standardized.
So, once an organization has found its’ perfect vendor, the accounts payable process can be broken down into four easy steps:
- Purchase order
- Receive goods and invoice capture
- Match, verify, and approve (made easy with automation)
- Pay the invoice, receive the receipt
Purchase Order
Purchase order forms represent the request from an organization to their vendors. They detail information like product skew codes, quantity, and price. Once the vendor accepts or gives approval for the purchase order form, it is no longer a request and instead becomes a contract.
This means that purchase orders need to be fulfilled by the businesses on both sides – products and payment – once accepted, within the time expected.
Purchase order forms are separate from purchase requisition forms. The latter are internal documents only and are typically sent for approval from department heads to accounting. Purchase requisition forms are sent to ensure finance has the budget to afford new orders and must be approved before a purchase order is made.
Both purchase orders and requisition forms can lead to a very manual back-and-forth struggle between departments and the financial budget team. Remove the paper workflows and rely on the electronic completion of these forms instead.
Receive goods and invoice
The next step, after the purchase order is accepted by a merchant, is that the company should then receive the goods, alongside their invoice.
At this stage, it’s important to check that the right products have arrived, in the correct quantities and good condition. And to fulfill due diligence processes by checking that the invoice applies to the order. There are many software options available that will help automate the processing of goods and inventory management so that you don’t leak cash.
Once the product shipment has been accepted, it’s much harder to let the merchant know that there were problems within the processes or point out errors on the invoice.
Match, verify and approve
The next phase of accounts payable is performing a two or three-way match to verify the invoice and vendor details before payment is made. Two-way matching involves the comparison of the purchase order and the invoice, usually by the procurement department. But three-way matching adds an extra layer of security because it also involves matching the shipping note.
By matching these documents, a business can avoid paying for items they haven’t received. For example, when a merchant has run out of supplies for one of the products, but sends everything else, simply paying the total of the purchase order would leave the recipient out of pocket. This is possible to perform in a manual or automated way.
Another round of checks that should be performed before paying the supplier is verifying their banking details. Fraud detection software like Trustpair can help.
Trustpair uses automation to check bank, company, and legal data in real time, blocking payments to accounts that look suspicious or are unknown. This way, Trustpair ensures that fraudsters can’t get away with compromising the merchant system and saves both you and the vendor precious time.
Pay invoice and receive receipt
Once all the details have been checked, verified, and approved, businesses should pay the supplier’s invoice. Then, the cycle starts all over again.
Typically, accounts payable workflows are quite slow, which means that some suppliers might be waiting 45 or 60 days as standard before they see their payments.
However, this can be frustrating and lead to tensions within supply chain relationships. And later payments mean that companies are missing out on early payment discounts, alongside the ability to optimize their working capital.
Automation: the ultimate way of securing and improving your AP workflow
While 6-8 weeks might be standard, companies can optimize their AP workflow to just a number of days. In fact, by reducing the time taken between receiving the goods and paying the supplier, organizations can build better third-party relationships and reap the lower cost benefits.
Accounts payable automation is the driving force behind this optimization.
For example, AP software can automatically capture the information on the invoice with optical character recognition (OCR). OCR technology relies on machine learning tools to read words and sentences from photos, or documents like PDFs (which are usually not machine legible).
By reading this information, ERP software can automatically match it to purchase orders or other documents with reliability. This prevents the risk of human error with large data sets and significantly speeds up the entire AP flow.
Moreover, platforms like Trustpair can be implemented within the process (and within the chosen platform thanks to native integrations) to reduce the risk of AP fraud. As mentioned, Trustpair validates the information found on invoices by checking the company and bank details against international data. Even if approved by team members, funds cannot be released until suppliers are verified.
What risks is the Account Payables workflow exposed to?
The accounts payable workflow is exposed to several risks, right from the initial supplier search to the very last step, paying the invoice. For example:
- Paying for goods and services not received: either through false documentation (fraud) or due to human error within accounting
- Failure to scale with demand: unsatisfied customers can knock growth and impact the reputation of your business
- Approving duplicate payments or failing to pay the merchant: complex and manual processes are prone to paperwork mistakes like these
- Taking too long to pay: creates tension with supplier relationships and means your company misses out on early payment discounts (and extra cash flow) thanks to long processing times
Performing full cycle accounts payable automation can prevent many of these risks, removing manual data entry and instead relying on a smooth workflow. Protect your company from fraud in the AP process by partnering with Trustpair. Our automation software performs account validation throughout the payment cycle and blocks scammers from infiltrating your business.
Optimizing your accounts payable process:
Optimizing the AP process means breaking it down into four key steps: purchase order, receive goods and invoice, match verify and approve, and pay. Automation can lead to fewer mistakes and a more reliable AP process. Trustpair’s software secures the AP process by relying on automated account validation throughout the payment cycle.
