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Mistakes, Fraud and Accounting Systems


In this era of sophisticated, cloud-based accounting software systems and apps, it’s reasonable to assume that basic things like Accounts Payable (AP) to can automate all things related to paying vendor invoices and other bills.

However, as any good CFO can tell you, nothing is that easy or straightforward. Accounting systems, especially with a growing volume of vendors and invoices, can easily miss fraudulent or incorrect invoices if the correct checks and balances are not designed into the overall AP process.

A recent article by PYMNTS highlighted some of the potential pitfalls of even sophisticated ERP systems:

“But as corporate treasurers and CFOs strengthen their strategic roles while their firms expand, they don’t have the time to think of the basics — like, say, making sure their procurement and AP departments don’t pay an invoice twice. Their flashy ERP systems should take care of that, right?

“It’s a bigger problem than CFOs might think… especially since they often assume those expensive and complex ERP systems have it covered.”

CFOs are often more focused with other urgent matters rather than something as mundane as catching duplicate invoice payments. Even more alarming, fraudulent activity is usually not caught by an accounting system, but, rather, by well-designed business process which makes people check crucial areas:

“Paying an invoice twice is hardly the only case where expensive, custom ERP systems can fall short on catching fraud and wasting money, he added. There are other instances that may go unchecked, like if an employee set up a fake vendor account so corporate payments to that supplier actually land in the employee’s bank account. Or there may be instances of an employee setting up a fake payroll account for another employee that doesn’t exist, again using the tactic to route payroll checks into a certain account.

“There are even instances where an ERP system may intend to identify these anomalies, but… fraud and error can slip through the cracks. For instance, if a supplier submitted an invoice for the same service twice with different invoice numbers, an ERP system that compares payments by invoice number wouldn’t catch that the company has paid the supplier twice for a single service.”

Automation only goes so far. Management and oversight still plays a crucial role in any business process.

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