How to Reduce Fraud by Automating Your AR Management

Dimitri Raziev07 Apr 20225 mins
How to Reduce Fraud by Automating Your AR Management

Automating AR is leading to a reduction in fraud. Manual invoice processing is not only a daunting and repetitive task but also leads to negative consequences in any organisation. The invoices are getting lost in the process, the approval process is not straightforward, negatively impacts the environment and is one of the most unpleasant aftereffects- an increase in frauds.

However, the businesses are not forced to stick to the manual process or spend budgets on cleaning up the consequences of the fraud or even invest excessively in cybersecurity. The simple first step is to automate the Accounts Receivables function. Thanks to modern technology adopting the latest solutions for AR management is easy. Kolleno offers cloud-based embedded AR automation solutions that will help your business to digitise the financial department and decrease fraud risk. Below we discuss the evidence of how manual AR functions can be a target for fraudsters. 

Global Pandemic and Fraud

The global pandemic has unintentionally accelerated the digital transformation of businesses across the globe. However, with the wider adoption of digital means of communication and collaboration, a negative side-effect has occurred- the risk of fraud has increased dramatically. In 2021 71% of organisations were victims of payment fraud according to The 2022 AFP® Payments Fraud and Control Survey. Another revelation is that the Accounts Payable department was the main target of fraudsters. 

Manual and repetitive tasks are not only laborious and slowly becoming a thing of the past. They also create a lot of opportunities for fraudsters. According to an AP Survey, the biggest pain of manual invoice processing was manual data entry (51%), lengthy approvals process (37%) but also fraud and security issues (16%). 

Reducing the risk of fraud is among the priorities of the surveyed companies. Moreover, among other urgent priorities were reducing data errors, better reporting and reduction in invoice processing times. The list can be long, however, the solution is simple. There are tools already available to companies that have a high volume of B2B payments. Kolleno software will help to reduce the errors and digitise the office of the CFO. Besides, more than 60% of employees state that the reduction of human errors is one of the key benefits of business automation. 

Fraud via Emails

The Business Email Compromise (BEC) is rising- according to Infosec Report organisations worldwide have lost $1.8 billion as a result of fraudulent emails. Cybercriminals are not standing still and are closely monitoring the latest trends and continuously adjusting their tactics. The BEC trends include the adjusted templates, targeting specific people or job functions. According to a different report, 34% of respondents stated that the finance department employees are the main target of fraudsters. Manual AR processing contributes to fraud. COVID-19 and remote work has facilitated the proliferation of fraudulent emails. There was a one-third increase in BEC during the first 100 days of the global pandemic.

Reduce Emails- Automate

It is a time-consuming task for your staff to chase clients who are missing the invoice deadlines. Sending reminders not only distracts employees from their core responsibilities but also can be very stressful for some. It is very common for the customers to miss the payment deadline, and according to the report, the businesses who have manual AR processes end up with 10 days longer DSO on average.

Circulation of emails that is a result of payment reminders and manual processing of the credit-control can elevate the risk of fraud. With AR automation the funds are less likely to be diverted to fraudulent accounts. All data is automatically synchronised via API with the accounting software in use. 

Kolleno Accounts Receivable software communicates with clients via several channels and each of them has clear payment instructions and links to the user-friendly payments portal. This way the client has a clear route to pay by choosing among the several popular payment methods. 

Fewer Approvals- Faster Payment

Even prior to the COVID-19 pandemic the preparation of the physical invoices was cumbersome. Especially when they required approval from senior management. When the finance department prepares the physical invoice, they send it for signature to the management. Sometimes, even someone in between as well for approval. This results in a long time to process the invoice. When the pandemic has forced companies to work remotely, the approvals of physical invoices have become even harder to get. So, finance managers started to seek methods to automate the AR function. According to PYMNTS research, more than 80% have implemented changes to their AR process, with over 60% moving away from the physical invoices.

Automation will not steal your job! 

Some critics of automation claim that AI or machines will steal jobs and that unemployment will be inevitable. However, the data does not support this. Accordion to the McKinsey report it is possible to automate only 5% of all current jobs. Nonetheless, in more than half of all occupations around 30% of tasks can be automated. This means that the employees are engaging in repetitive and manual work that does not fully open up their potential.

Moreover, according to the study by SnapLogic around 90% of surveyed employees are burdened with repetitive tasks that easily can be automated. Specifically, tasks connected with data such as collection, processing, and analysing may cost the business 19 working days per employee. This does not mean businesses can reduce the workforce by introducing automation. It means that the employees can focus on the more value-added and motivating tasks. The survey of workers shows that 78% of employees can focus on more efficient tasks thanks to the automation of repetitive tasks.  The 2021 Office Worker Survey has revealed that 58% of workers believe that repetitive tasks don’t allow them to reach their creative potential.  

Implementing AR Automation

The Kolleno AI-powered software extension is capable to send reminders to clients who miss or might miss their payments completely automatically. This will remove the need to chase late invoices away from your staff and will increase their productive working hours. Moreover, our solution will choose the most appropriate tone of voice. Also, it will contact the customer via the most effective communications channel. As a result, the risk of fraud decreases dramatically with AR automation.