Improving payment security is a major priority for every company, whether they process transactions digitally or rely on manual paper processes to track expenses. There is a good reason to be preoccupied with security: online cyber attacks on companies are on the rise, and technology is struggling to keep up. Though this may seem dire, there are ways you can fight against payment fraud and better protect your assets. By understanding the costs associated with fraud and the tools available to heighten your company’s security, your business can improve your financial standings by proactively taking steps to minimize its risk.
The High Cost of Fraud
Forged checks are a huge security liability and can be a pain to reverse. Your company may incur insufficient fund or late payment fees, and it takes time to work with your bank to rectify these unauthorized payments. Correcting an error is rarely resolved within a day. For companies that track their finances manually, fraudulent charges can go unnoticed for a long time if missed during an audit. One pending fraudulent charge can cause an avalanche of interrupted payments, and it can take a long time to correct the problem. This coupled with issues like double payments, scammers issuing unauthorized payments, and accounts compromised from using unsecured payment methods, can result in significant financial danger for your company.
Types of Payment Fraud
Payment fraud can come in many forms; there are many digital methods used to make unauthorized payments, all of which are caused by scammers or hackers stealing information. Many e-commerce websites encounter hacking scams because of the integrated platform they use to sell goods or services, but all companies can encounter the most common types of frauds. Outlined below are five basic types of fraud businesses may encounter:
Stolen, Copied, or Modified Company Checks
The most popular form of payment fraud. In fact, a mailed paper Company check to pay an invoice is 10 times more likely to result in causing fraud than an electronic payment sent to the same vendor. This explains why the majority of US business with over 50 employees use Positive Pay to help prevent this liability of the mailed check being stolen, copied, or altered.
Identity Theft through Hacking
A common type of online payment fraud, identify theft involves stealing personal information from a person or company. This information is then used to make payments, transfer money, open credit accounts, or used to steal additional bank information.
Phishing is the reason you should never enter personal or sensitive information into a website that is unauthenticated or untrustworthy. Scammers can steal personal information by tricking people into entering personal or bank login information into a fake website.
Wire Transfer or Pre-paid Scams
This type of scam involves a hacker contacting an individual, business, or other entity to request advanced payment for something with the promise of sending payment back, often at a higher amount. This money, of course, never arrives. Since wire transfers cannot be canceled or reversed, it is easy for scammers to get money this way.
Merchant Identify Fraud
Similar to phishing scams, a merchant identity fraud occurs when a scammer sets up a fake merchant account and uses stolen credit card information to make purchases. Since the account is fake and not traceable, the scammer can steal money before the charges are discovered.
Choosing the Right Security Option for your Business
Many electronic payment methods have advanced security features to detect and prevent fraudulent charges. Many banks and credit card businesses offer their clients protection features to help identify and rectify fraud charges. Positive pay systems, for example, are accounting tools that help protect your business by detecting fraudulent checks and preventing them from being processed. Electronic checks are easier to verify and track than paper ones, and since most banks accept eChecks and allow mobile deposit, this option can save your company time and money.
Embracing a system that works with your existing accounts can be helpful because they can alert you to fraudulent charges even before funds are taken from your accounts. Since many payment types are insured, like payments through the ACH network, this additional protection goes a long way in preventing fraud. If you choose a solution that is not reliant on your bank, you can receive better protection for longer; if you decide to change banks, you may run the risk of being unprotected or being locked into a plan. Make sure you choose the right security option that fits your business and operational needs.
Automation Solutions for Better Payment Security
Payment automation tools allow your company to create customized portals to fit your business needs and give you greater control over your finances. With this heightened visibility, it is easier for your AP staff or managers to check on payment status and verify bank information, which makes it easier to see unauthorized charges from an account.
AP automation solutions capture and record invoice data and process it against past charges. Duplicate or unauthorized invoices are flagged for staff to review before being routed, which helps prevent your company from accidentally paying them. This same data capture integrates into existing software and storage, so running on-demand reports is easy. These reports help your business check finances and outgoing payments for even better security protection.
Avoiding Fraud by Finding the Right AP Payment Automation Solution
Payment fraud is an inevitable risk for companies who rely on technology to receive payments, process invoices, and handle funds. In other words, every modern company faces the possibility of experiencing fraudulent charges. Understanding types of fraud will hopefully help your company avoid it, but investing in heightened security protection is a better solution. Many banking institutions and credit cards have built-in security features to identify and mitigate fraud charges, which are often free for customers. AP automation adds another layer of protection by giving your company the tools to verify payments, reconcile bank statements, and catch duplicate or unauthorized purchases before being processed.