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Employee Fraud: Why Approvals and Integration are the Keys to Protecting Your Business

Last week, CBS New York reported that the Karen Sipes, former director of finance at Toll Global Forwarding, admitted to stealing $1.3 million from the firm through an elaborate false invoicing scheme. As part of her scheme, Sipes would:

  • Identify vendors with a high number of transactions and invoices in the accounting system

  • Create and input fake transactions and invoices for these vendors

  • Prepare the checks payable to herself

Sipes also admitted to altering vendor details to her own and making out checks payable to herself, as well as using Toll Global Forwarding checks to pay a family member’s credit card bill. Sipes then would wipe all evidence of her fraudulent actions from the accounting system.

Sadly, this story is all too familiar to many organizations. Employee fraud is highly insidious, and while not the case here, it can potentially put a business in financial ruin. In this case, Sipes had too much control over the company’s AP processes, and it highlights how important it is to have internal processes that combat this type of fraud.

Having a clear separation of duties is probably the most effective way to control your AP process. Having one person generate payments and the another approve them keeps your AP process efficient, transparent, and controlled. From the story, it looks like Sipes was both generating and approving payments–far too much control for one person.

Another way to combat this type of fraud is to reconcile your accounts regularly.  Businesses that do not balance their books monthly often won’t detect fraud until months later, and at the point, the damage has been done.

Approval workflows and reconciliation, though necessary, are a bit onerous, especially if an AP process is paper-based.  The best way you can secure your AP process is to implement an AP automation solution that has a built-in invoice and payment approval workflow, as well as integration with your ERP and business bank account. The automated approval workflows will vastly improve your invoice and payment processing times, and integration with your ERP and business bank account will make the reconciliation process a breeze.

Most importantly, both of these features will drive greater transparency and efficiency in your AP process.

 Interested in learning more about payment fraud? Check out our free whitepaper “The Business Guide to Account Takeover Prevention.”

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