How to Detect and Prevent Accounts Payable FraudFraud is widespread but also very preventable. Learn about common types and the best ways to protest yourself and your company.

This story originally appeared onUnder30CEO.com

Business fraudis real. According to areportby the Association of Certified Fraud Examiners, "U.S. Businesses will lose an average of 5% of their gross revenues to fraud."

One of the most common types of fraud is accounts payable fraud. This refers to anytime abusiness-to-business(B2B) payment occurs illegally. AP fraud can be committed by employees, vendors, suppliers, cybercriminals or scammers.

There are two main types of AP fraud: internal and external APfraud. Let's go over both.

Internal AP fraud

Internal fraud starts with someone from within the organization. This could be a billing scheme in which bills are paid to fraudulent beneficiaries posing as legitimate ones.

Related:4 Ways to Protect Your Business Against Employee Fraud and Theft

It could also be employee reimbursement fraud, in which an employee creates false expense claims that they have the business reimburse them for.

Another form of internal AP fraud is kickback fraud. This is when an employee works with an outside bad actor, sends them funds fraudulently, and shares the profits (hence the kickback).

External AP fraud

External AP fraud starts with someone outside the company. It could take the form of a wire transfer scam, in which the perpetrator pretends to be a legitimate vendor and asks the company to transfer funds to a nefarious bank account.

Similarly, external AP fraud could be a phishing attack, in which the attacker tries to gain access to the business's computer system with a virus disguised as a link. Identity theft is another form of external AP fraud. This is when someone steals ID information from an employee and uses it to gain access to AP funds.

In some cases, external AP fraud happens through an account takeover. This is when someone gets access to AP information and starts making fraudulent payments to themselves or others.

How to detect AP fraud

To prevent AP fraud (and the massive losses that can come with it), a business needs totake serious precautions. Fraud can be hard to detect, so you must take extra care to have preventative systems in place.

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Here are some tips on how to detect and prevent AP fraud:

• Look for anomalies. If an invoice or payment looks off, take a closer look. Any irregularities should be investigated.
• Automate AP processes. Instead of relying on manual data entry, use accounts payable automation software. This helps prevent human errors and maximizes cybersecurity.
• Perform regular audits. Make a habit of regularly reviewing AP processes. This can help expose vulnerabilities that need to be addressed.
• Educate staff on best security practices. Well-meaning employees can sometimes take dangerous security risks. Make sure they know the best cybersecurity practices such as creating strong passwords and using aVPN.
• Pay attention to red flags. These can include invoices with the same address as an employee or only a P.O. box, duplicate vendors, missing checks and signatures, complaints by suppliers about late or non-payments, odd employee behavior, and more.
• Stay up to date on the latest fraud strategies. Criminals change their tactics all the time. So it's important to stay on top of the latest trends in online fraud.

Accounts payable fraud is a risk for every business. Whether your business is big or small, now is the time to make accounts payable fraud detection and prevention a priority.