Accounting Automation & Beyond

DocuPhase’s blog provides valuable insight into how your company can benefit from implementing automation & document management into existing processes.

Staying Ahead of Financial Fraud with AP Automation


The uncertainty of our current economic climate has business finances under the microscope.  

Financial fears and risks are looming large on business agendas, prompting closer examination of practices and bringing CFOs into more decision-making processes than ever before. 

Rising inflation has instilled recession concerns for months, as pressure has piled on leaders to eliminate unnecessary expenses. Couple that with labor challenges and tightening federal economic policies, and it’s clear that CFOs’ top stressors for 2023 won't be dissipating in the second fiscal quarter. 

Most recently, the collapse of Silicon Valley Bank has fanned the flames. In some ways this event posed a catalyst for heightened awareness, but in others it represents economic sentiments at large: namely, fears of financial insecurity and mismanagement. 

With a global spotlight on financial security, implementing AP automation has become more critical than ever to keep businesses and their customers compliant and safe. 

In this article, we’ll address the cost of AP fraud, its most common forms, and how DocuPhase’s AP automation platform addresses all of these concerns in one place. 

The Cost of AP Fraud

Studies show that mid-market businesses are losing an average of $280,000 annually in payment fraud–and that only accounts for instances of fraud that have been caught. 

The cost of fraud is further amplified by fees incurred for legal actions, as well as losses due to missed opportunities for growth. According to a report, 36% of companies that relied on manual fraud detection methods claimed that the ability to expand their business was impeded by financial losses due to fraudulent activities. 

Losses could be far greater than we can measure, making it imperative for businesses to fortify their fraud prevention measures and strengthen their responses to financial misappropriation. 

Most Common Types of AP Fraud 

Fraud in AP departments can take many forms. Four of the most common instances are: 

  1. Billing fraud, which is difficult to identify because fake invoices will frequently appear legitimate in format and content.  
  2. Check fraud, which accounts for 66% of payment fraud, according to the Association for Financial Professionals (AFP), due to the ease of forgery or alteration. 
  3. Expense report fraud, which can easily go unnoticed if employees have too much freedom in their expense submissions or if systems lack proper controls. 
  4. Vendor collusion fraud, which can be difficult to detect, as the fraudsters often work together to cover their tracks and avoid suspicion. 

Visibility into many of these actions can be extremely difficult, especially when fraudulent activity is perpetrated or assisted by internal employees. But businesses that use AP automation solutions to increase process controls and set more rigid business standards are better equipped to catch and address instances of fraud upfront. 

Fighting Fraud with AP Automation 

With AP automation solutions in place, business leaders can effectively identify and prevent the four most prevalent forms of AP fraud and reduce fraudulent activity within their organization. 

1. Billing Fraud

With AP automation solutions, invoices are scanned and indexed using optical character recognition (OCR) data capture, ensuring accurate entry of details like vendor information, line-item quantities, and amounts.  

This fully automated process is powered by machine learning and AI. DocuPhase Capture is constantly improving with each use, eliminating the risk of erroneous data that commonly arises with manual entry. 

Once data has been accurately captured, advanced AP software can also automate the validity of data including vendor information by comparing it with data synced from your ERP system 

Automated two, three, and four-way matching also ensures that invoice line-item quantities and costs match up with purchase orders and goods receipts, flagging any exceptions to help AP teams identify suspicious activity and ensure payment accuracy before remittance.  

The checks and balances of your billing processes are further fortified by automatic approval routing in your AP automation software.  

Moving through approval workflows based on pre-determined rules with invoice amount thresholds guarantees that each invoice has been appropriately validated. For example, when multiple levels of approval are needed to process invoices exceeding a certain dollar amount, businesses increase the likelihood that unauthorized or fraudulent invoices will be identified and rejected before payment. 

Lastly, collaboration tools that exist in best-in-class AP solutions will allow your teams to further vet invoice payments by facilitating comments and annotations from other departments. This empowers your teams to work together to share information and verify the legitimacy of bills, forms, and other requests received. 

2. Check Fraud

AP solutions that complete the procure-to-pay process with integrated vendor payments greatly reduce instances of check fraud.  

By paying vendors automatically within an AP solution, businesses eliminate instances of payment manipulation, loss, or theft that occur frequently when depending on paper checks. 

While fraud can still occur in digital transactions, robust AP automation and vendor payment platforms like DocuPhase have security features that ensure data safety and record-keeping compliance.  

Fraud prevention measures in an ideal AP automation solution include SSL/TLS data encryption, robust identity and access management controls, level 1 PCI DSS compliance, and adherence to NACHA standards. These features help your business proactively prevent instances of check and payment fraud while protecting sensitive financial information from falling into the wrong hands. 

3. Expense Report Fraud

A 2022 study from the Association of Certified Fraud Examiners (ACFE) found that 29% of occupational fraud can be linked back to a lack of internal controls. 

When businesses lack controls that keep processes consistent and sufficiently monitored, it becomes easier for fraud, like fabricated or misleading reimbursement requests, to slip through the cracks unnoticed. 

AP solutions mitigate this by enforcing standardized approval workflows. When processes are configured such that the appropriate parties are required to view and sign off on these requests, it becomes far less likely that counterfeit documents will make their way through to payment.  

Process visibility and performance analytics in AP software also grant insights which can help businesses detect and prevent fraud. By granting greater visibility into AP processes, leaders can identify and address anomalies such as an abnormally high volume of expense reports originating from a particular employee or department. 

4. Vendor Collusion Fraud

AP platforms help monitor and alert users to changes or irregularities in vendor activity to prevent instances of collusion.  

Exception reporting in DocuPhase helps businesses identify instances of unauthorized kickbacks by allowing users to identify unusual or suspicious activity in the AP process.

With customizable reporting tools and process dashboards, users can easily visualize high-level data and identify unusual activities, like an exceptionally large number of transactions processed by a specific AP user or vendor. And stakeholders who can promptly identify such anomalies can perform internal audits and verify the activities more quickly to uncover and address instances of collusion. 

Looking Ahead 

Our turbulent economy is unlikely to settle anytime soon, and fraudsters will continue to exploit the vulnerabilities that exist in remote work environments and digital processes. 

That’s why it’s more important than ever for businesses to do their due diligence when it comes to anticipating and preventing instances of fraud–and those who turn to AP automation will be able to stay agile and resilient in the face of new challenges. 

For more information on how DocuPhase helps secure your business, download our tip sheet on eight ways to increase your document security, or view this blog with tips on assessing and improving your cybersecurity measures. 


A leader in Enterprise Automation software, DocuPhase delivers document management, workflow automation, and capture tools designed to help your enterprise stay organized and meet evolving technology and business needs.

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