Accounts payable sits at the point where money leaves the business, which makes it a target for fraud and a source of costly mistakes. Late payments damage supplier trust and add fees. Duplicate and fraudulent payments are hard to recover. And when nobody can see the status of an invoice, forecasting and the month end close both suffer.
Payment fraud remains widespread. The AFP Payments Fraud and Control Survey, published with J.P. Morgan, found that 74% of organizations were targets of payments fraud in 2020, a year when many finance teams moved to remote work overnight. The figure is several years old, but the risks it describes have not gone away. This guide covers the three biggest accounts payable risks and the controls that reduce them.
Risk one: missed invoice due dates
When invoices arrive on paper or in several inboxes, some wait days before anyone enters them. By the time they reach an approver, the due date is close or past. Late payment can bring penalty fees and interest, strain supplier relationships and cost the business early payment discounts it was entitled to.
Late payments also distort cash planning. If treasury cannot see what is due and when, it cannot plan reliably. The fix is speed at intake: capture every invoice the day it arrives, extract its due date and discount terms, and route it to the approver at once. See contract payment terms for how terms in the contract should flow into accounts payable.
Risk two: fraud and malpractice
External fraud
- Duplicate payments: the same invoice is paid twice, through error or because a supplier resubmits it in another format. See how to deal with duplicate invoices.
- Fictitious or unapproved suppliers: payments go to a supplier that does not exist or was never approved, for goods or services never delivered.
- Bank detail fraud: a criminal posing as a real supplier asks for its bank details to be changed, and the next payment goes to the wrong account.
Internal fraud
- False billing: an employee creates invoices for payment to themselves, alone or with an outside party.
- Unauthorized payments: payments released outside the approval process, by check or automated clearing house (ACH) transfer.
- Tampering with records: changes to financial data after payment to hide what happened.
Internal fraud is the hardest to detect because the people involved know the controls. Separation of duties is the basic defense: the person who sets up a supplier should not approve its invoices or release its payments.
Risk three: poor payment visibility
Manual processes leave invoice status in people's heads and inboxes. Suppliers call to ask when they will be paid, and someone has to look it up. Finance cannot see accrued liabilities clearly, so forecasting is weaker and the close takes longer. And when an auditor asks why an invoice was paid, the answer is hard to reconstruct.
Which controls reduce accounts payable risk?
| Control | Risk it addresses |
|---|---|
| Verify every new supplier and any change to bank details through an independent channel | Fictitious suppliers, bank detail fraud |
| Restrict who can create or edit supplier records | Internal fraud, duplicate suppliers |
| Receive invoices digitally through one channel | Missed due dates, duplicates |
| Match invoices to purchase orders, receipts and contract rates | Overbilling, false billing |
| Route approvals automatically with limits by amount | Unauthorized payments |
| Check for duplicates on supplier, amount, date and reference | Duplicate payments |
| Keep a complete audit trail of every change and approval | Tampering, audit risk |
| Report on invoice status and exceptions regularly | Poor visibility, slow close |
Verify suppliers before they are paid
Only approved and verified suppliers should exist in the vendor master. Check tax IDs, addresses and bank details at onboarding, and treat any later change to bank details as a high risk event that needs confirmation through a known contact. Controlled vendor onboarding with Onboardingflow keeps this consistent.
Move accounts payable to a digital process
Paper invoices get lost, delayed and copied. A digital process captures each invoice once, keeps it in one place and makes every step traceable.
Automate approval routing
Automated routing sends each invoice to the right approver based on amount, department and category, with limits that add a second approver above set thresholds. Every approval is time stamped, so finance leaders can see who approved what and when.
Use AI to watch for anomalies
AI review can flag duplicates, charges above contract rates, unusual amounts and new suppliers with unusual patterns. In Invoiceflow, Aavenir AI checks each invoice against the purchase order, receipt and contract and raises exceptions for an accounts payable specialist to decide. A person approves every flagged item.
Audit and improve continuously
Review transactions regularly, run random audits and keep searchable electronic audit trails of every invoice and payment. Use reporting on exceptions, approval times and late payments to find weak points and fix them one at a time.
The bottom line
Accounts payable risk comes from three places: invoices paid late, payments that should never have been made, and too little visibility into what is owed. Verify suppliers, take invoices in digitally, match them to orders and contracts, route approvals with limits and keep a full audit trail.