Continuing on from the discussion I had with Colin Rigby recently (if you missed last week's blog, please click here). This blog will continue on the conversation we had discussing AP Forensics, the Risk review process and the value this brings when considering migrating or upgrading solutions.
ML – What would you see as some of the additional benefits for organisations?
CR – AP Forensics can provide the following 4 substantial benefits.
Transactional Visibility - Senior finance professionals across the globe often report challenges with maintaining visibility over their financial operations. The issue is understandable given the circumstances. The modern P2P environment is complex and fast-moving. Substantial volumes of invoices are often processed using largely automated systems overseen by a limited number of overworked staff. Increasing visibility over operational finance and focusing on prevention are both made possible by utilising analytical software such as the AP Forensics® Suite provided by FISCAL. Implementing such a solution can provide modern finance professionals with a significant advantage by providing real-time insight and information and thus enable them to enhance controls, strengthen compliance and protect working capital. Taking action can lay firm foundations for more effective and efficient financial performance going forwards.
Supplier Master Data - Regular pro-active supplier file management is a key factor in protecting an organisation from potential overpayments and fraud. Yet many organisations fail to focus consistently on this significant component of an effective control environment. The master supplier file (“MSF”) can be a breeding ground for fraud and strengthening internal controls around supplier records reduces risk and increases detection rates. The standard controls built into an ERP system fail to flag potential duplicate payments entered onto different supplier accounts. Duplicated supplier records can therefore vastly increase the risk of overpayments with around 25-30% of overpayments often attributable to this issue. Any significant upgrade or change of ERP system requires a clean supplier master data as a prerequisite. A well-maintained supplier file saves time and resources by facilitating faster look-ups, efficient processing and less maintenance. Financial information (e.g. spend by supplier, payment to terms) is far more accurate if supplier data is not fragmented. Preventing and recovering overpayments is also far more efficient when dealing with active suppliers who have future business at stake.
Process Improvement - Insights derived from the transactional and supplier data controlled by AP/P2P can help to facilitate collaboration for mutual benefit between AP/P2P, treasury, procurement and audit. Increased focus on working capital optimisation by AP/P2P helps to protect cash flow and provides intelligence to assist treasury with cash forecasting. Sharing knowledge around supplier data and behaviour enables procurement and AP/P2P to work closely over supplier on-boarding, strengthen spend management and facilitate efficient ongoing master data maintenance. Proactive analysis combined with greater awareness of risk provides a platform for AP/P2P to collaborate with audit to formulate an effective counter fraud policy.
AP Forensics software - Suite drives process improvement by;
- Enabling a preventative strategy to overpayments and fraud,
- Daily Risk Reports highlighting high risk transactions with root cause analysis and reason codes,
- Real time actionable insights from 15 dashboard widgets and over 60 pre-defined reports,
- Support for regular proactive master file maintenance which reduces vulnerability to overpayments and fraud,
- 14 different individual tests to identify red flags around supplier behaviour,
- APT Watch List and Fraud Summary Report highlighting high risk suppliers,
- Promoting collaboration between departments to leverage insights from data analysis.
Finally, we have FRAUD - AP Forensics can make a valuable contribution to the prevention and detection of fraud by facilitating continuous proactive monitoring of transactional and supplier data.
The Suppliers module enables regular pro-active maintenance of Master Data and a poorly maintained MSF tends to manifest itself in a higher vulnerability to fraud.
Bank changes reporting provides heightened visibility to guard against invoice mandate fraud. A check can also be performed between employee/payroll data and supplier records to check for matching bank details.
The Fraud module performs 14 individual checks around supplier behaviour to highlight potential red flags and compiles as composite “risk register” ranking all suppliers according to their performance across the suite of tests.
Benefits reported by users include:
- Financial Assurance: reputational assurance, audit assurance supporting a counter-fraud policy and best practice.
- Fraud Detection: proactive identification of irregularities for investigation,
- Fraud Prevention: flagging of potentially fraudulent transactions, providing a visible deterrence and facilitating sharing of lessons learnt,
- Improved Financial Controls: continuous service monitoring with key learnings fed back into control improvements,
- Process Improvement: ability to analyse supplier spend and business behaviours to identify areas for improvement,
- Increased visibility: via time efficient monitoring of Accounts Payable KPI’s.
ML – Thanks for all this information, all relevant and valuable. As you know we have many clients on various ERP Systems, can your solution help during time of migration/change ?
CR – Excellent question!
In the lead-up to major ERP projects there is a tendency to postpone all other initiatives. However, any significant period of transition represents a high point of vulnerability to errors, overpayments and fraud.
Prior to an upgrade, a finance team needs to review processes, benchmark key metrics, re-define roles, clean up key data and thoroughly plan for transition. During implementation the pace of change is intense, time becomes a scarce commodity and systems are in a state of flux. Multiple factors combine to necessitate heightened vigilance at the very time when an organisation faces severe resource constraints.
Ongoing vigilance is required after “go live” yet often only “open items” (unpaid invoices) are brought across from the legacy system - thereby restricting the ability to check between current and previous transactions.
AP Forensics® can underpin an ERP upgrade and become an essential component – supporting data cleansing, monitoring processes, reducing risk and providing assurance.
Finance can benefit greatly from conducting detailed analysis of P2P process over recent history. Such analysis can provide insights into which areas may require improvement in order to drive greater efficiency and can identify high risk transactions and suppliers. There is an often-time-consuming requirement to cleanse the master vendor file intelligently and identify suppliers that have been incorrectly added, duplicated, have errors or are fraudulent.
The master vendor file needs to be culled to ensure that only essential and “active suppliers” are migrated to the new system. The handling of multi-site vendors and sundry accounts also needs reviewing.
Creating benchmarks in terms of metrics / KPI’s around performance can provide valuable measures for comparison: ultimately the aim should be to ensure improvement after the upgrade.
During this phase of implementation there are many moving parts with people learning new processes and generally stretched for time. Errors are expected and the risks of fraud increase as the new system approaches “go-live”.
This is a period when a great deal of time and resource is dedicated to implementation; focus is diverted, risks increase and extra vigilance is required.
Constant monitoring of P2P transactions and heightened visibility provides valuable assurance when the organisation is most vulnerable.
Once the new system goes live, standard practice is for all historical transactions to have been archived, “open items” only to be transferred and the old system switched off. The ability to check new entries against old is thereby severely restricted.
AP Forensics® provides a valuable repository for historical transactions and enables time-efficient
cross-checking of entries on both systems to ensure that duplicate payments are not made and to reduce vulnerability to supplier fraud.
Increased vigilance is required around unscrupulous suppliers who might take advantage of the period of vulnerability and lack of a historical database.
A set of metrics / KPI’s generated from the new system can be used to compare against the ones taken prior to the ERP change. Improvements can be quantified and actionable insights used to drive greater efficiencies post implementation. The ultimate aim is to enable clear measurement of the benefits, value & success of the ERP implementation.
AP Forensics® can support the process of transition, maintain assurance and mitigate against risk.
ML – Your strapline is “protecting organisational spend”. How do you go about doing that, and why is it important for today’s businesses?
CR - Visibility gives you power. If you can measure something, then you can make an attempt at controlling the information that measurement gives you. For example, supplier fraud is on the increase, so organisations need to be able to understand how their systems could be undermined. We are able to provide continuous forensic monitoring for risk and, because our solutions are designed to be used by accounts payable staff on a daily basis, we’re both saving time and protecting money. These are supremely important for a business at any time but especially so when the economy is still wobbling. It’s not just about saving money in the here and now though; we can also produce predictive analysis reports to protect organisations in the future and help strengthen their P2P strategies going forward.
ML – Thanks Colin!
CR – You're welcome, we look forward to processing your Risk Reviews and giving your clients valuable insights into their transactional finance, enabling to have a highly preventative strategy to combat supplier fraud , overpayments, compliance issues and invoicing errors, without obligation!
If you are interested in and would like to know more about anything discussed in this blog, please contact us here.