7 Red Flags and Tips for Detecting Accounts Payable Fraud

Accounts payable fraud risks finance and security and is an ever-growing threat for businesses. With increasingly sophisticated methods, fraud can go undetected for months – or even years – unless robust fraud detection and prevention controls are in place. 

At Westgate Moore Associates (WMA), we specialise in payment audits that identify payment discrepancies, locate duplicate payments, ensure payments are made to intended suppliers and recover financial leakage. In this blog, we’ll help you uncover the most common red flags of AP fraud and offer actionable prevention tips to safeguard your working capital.

Why is accounts payable fraud a major concern?

Accounts Payable fraud can take many forms, such as:

• Duplicate invoices.
• Fake suppliers.
• Kickback schemes.
• Unauthorised payments.

With remote working being adopted by many businesses, the risk of fraudulent activity has grown significantly. Manual processes, incomplete reconciliations, and a lack of AP fraud prevention controls create an environment where fraudsters can thrive.

By identifying red flags early on and adopting automated fraud detection tools, businesses can prevent the chances of fraud.

Common red flags of Accounts Payable

1. Unexplained Supplier Payment Increases

If a specific supplier suddenly receives larger-than-usual payments without a corresponding increase in goods or services, it could be a sign of Accounts Payable fraud.

Prevention Tips:

• Regularly conduct vendor audits to confirm payments are correct.
• Implement three-way matching (ensure the invoice, purchase order, and goods receipt all match).
• Use automated services like WMA’s Payment Audit Services to identify unusual payment trends.

2. Payments Just Under Approval Limits

This is where fraudsters submit payments just below the threshold that requires additional authorisation to avoid scrutiny.

Prevention Tips:

• Randomly review low-value payments to identify suspicious activity.
• Use AP automation tools to flag repeated payments near approval limits.
• Set up multi-level approvals for all transactions, regardless of value.

3. Duplicate Payments or Invoices

Receiving and processing multiple invoices for the same transaction is one of the most common tactics of AP fraud.

Prevention Tips:

• Implement a payment audit process that spots duplicate payments.
• Automate invoice matching to cross-reference invoices with purchase orders and receipts.
• Cleanse and update your supplier master file to eliminate duplicates.

At WMA, our solutions help businesses locate and recover payment discrepancies, ensuring no duplicate payments go unnoticed.

4. Fake Suppliers or Ghost Accounts

Fraudsters may create fake suppliers or manipulate existing ones to funnel funds. Look out for unusual supplier names, addresses, or bank details.

Prevention Tips:

• Verify all new suppliers with rigorous onboarding procedures.
• Conduct regular supplier master file audits to identify anomalies.
• Use reconciliation tools like WMA’s automated solution to validate payments against supplier records.

5. Sudden Spikes in Payments

Random increases in payment volume, especially during off-peak periods, could indicate fraudulent activity.

Prevention Tips:

• Monitor payment trends using data analytics tools.
• Set automated alerts for unusual spikes or irregular patterns.
• For easy monitoring, standardise payments through a centralised channel.

6. Manual Payments and Lack of Documentation

Manual processes are prone to errors and manipulation. If payments lack supporting documentation this could be a sign for fraud.

Prevention Tips:

• Use a digital AP system to automate invoice approvals and payment processing.
• Ensure all payments are supported by verified purchase orders and receipts.
• Conduct periodic audits to identify gaps in documentation.

7. Irregular Payment Timings

Fraudsters may exploit busy periods, such as year-end or holidays, to push through unauthorised payments, as they’re more likely to go unnoticed.

Prevention Tips:

• Implement strict payment schedules to reduce irregularities.
• Use automation to ensure consistent approval workflows occur.
• Regularly reconcile AP records with supplier statements to detect errors early.

Improve Accounts Payable fraud detection with WMA

Manually managing accounts payable processes leaves room for error and fraud. By adopting automation like WMA’s supplier statement reconciliation tool, businesses can significantly reduce AP fraud risks. Benefits include:

• Processing power of 100% monthly reconciliation – Thousands of line items can be reconciled in seconds.
• Fraud detection – Automated systems flag duplicate invoices and suspicious transactions in real-time.

Learn more about WMA’s advanced software and how it can protect your AP function today.

Ready to protect your business? Learn more about how our Payment Audit Services and Supplier Statement Software can protect your AP function today.