AP Benchmarks Reveal Opportunities for Fraud

An APEX Analytix survey uncovers some weak spots in global accounts payable departments.
Vincent RyanAugust 24, 2017
AP Benchmarks Reveal Opportunities for Fraud

What does a high-performing accounts payable organization look like? According to APEX Analytix, provider of supplier portal software, it has high levels of electronic invoice submission, touchless invoice processing, and electronic payments. It also has five or fewer standard payment terms, and reviews “at risk” suppliers at least monthly. It is also tightly integrated with the internal audit and corporate security teams.

Unfortunately, not many accounts payable units meet all of those high standards. In fact, according to APEX Analytix’s benchmarking report, released this week, many AP functions, in their lack of implementation of some best practices, are leaving their companies’ “dangerously open to payment fraud.”

APEX Analytix surveyed 170 global 1,000 companies about their AP policies and practices. Most AP organizations report high levels of compliance with accepted relevant best practices: 87% have a global chart of accounts; 89% submit monthly AP metrics to senior management; 79% have service-level agreements with customers; and 63% have a global payables platform.

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But the survey also found “a troubling lack of integration and visibility” across teams: 54% of AP departments report that they don’t partner closely with internal audit, and 82% are not connected to corporate security, APEX Analytix said.

A high number of AP organizations report relatively strong compliance with accepted risk management best practices, APEX Analytix found. For example, 78% require completion of a standard vendor profile form prior to vendor set-up; 75% capture a verifiable physical address; and 75% also ensure that vendors’ names and addresses meet company coding standards.

But in other areas of fraud prevention there appear to be weak spots.

For example, 65% of the businesses say they don’t authenticate vendors against external data sources and only 14% capture verifiable details of a vendor’s beneficial owners and officers. In addition, 11% of businesses review high-risk vendors only once a year, and 15% don’t do so at all.

When it comes to individual payments, there are other vulnerabilities. In the average business, more than a third (36%) of payments aren’t associated with purchase orders or contracts. And at 51% of the surveyed organizations, a secondary review of high-value payments is not required. Finally, 79% of businesses don’t cross-check their employee records against their vendor data, to ensure employees are not posing as suppliers.

Outside of fraud prevention, most AP departments report high levels of cash management best practices. But even here, there is room for improvement. For example, while 43% of businesses capture more than 80% of the supplier discounts available to them, 10% capture less than 60% of available discounts, and 41% do not formally track levels of discount capture at all.

In addition, only 48% of respondents say they issue days payable outstanding (DPO) reports to senior leadership, “which indicates a disconnect between AP and treasury,” says APEX Analytix. In addition, only 27% of respondents monitor “quick pays” — invoices paid within ten days of receipt — “which bring a working capital penalty, eliminate any opportunity for discount capture, and present the greatest risk of overpayment and fraud,” according to APEX Analytix.

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