All companies today are under pressure to lower the fixed costs of doing business, and find create ways to consolidate internal services without compromising operations - while maintaining or improving profit margins! New technologies, business expansion, mergers and acquisitions and the demand to keep pace with change each contribute to the risk of human error, and the possibility of fraud. Over time, the accumulation of apparently small human errors in A/P will amount to millions of dollars in lost revenue.

To meet the new demands, many companies are combining their accounts payable activities into a "shared service" department.

Managing A/P services across the enterprise, especially for autonomous A/P departments serving different business units, is a daunting task. Consistency in software, A/P practices, vendor selection criteria, and invoice processing will minimize the risks for the company and yield the highest operational cash flow. Regulatory and management pressures are sufficient motivation to develop a high integrity system across the entire enterprise, focusing on these strategies:

• Process reengineering & optimization to eliminate inefficiencies and maximize A/P performance and savings
• Re-evaluate staff deployment while considering cost pressures and the need to optimize overhead
• Employ Six Sigma quality management techniques in the A/P process
• Develop a strategic approach to A/P and audit recovery company-wide

No doubt you saw the Building 19 carpeting fraud case in the news this Spring. Video surveillance cameras would never have caught this $4.8 inside theft! They got away with it for a while, but a buyer for the company who went with her gut instincts, asked questions and ultimately exposed the culprits!

I suppose if I laid out every detail of what I learned, I'd be teaching readers how to set up a scam of their own, so I'll be brief! Suffice it to say that one of the buyers questioned an invoice and said he didn't think they got that much carpet. When the buyer looked into it, it turned out the vendor shipped less carpet than they billed for.
After they realized what was happening, they looked through the purchasing files for "proof of deliveries" and other trucking records and found multiple shipments that were overstated.

They've changed their process so that two people have to sign for incoming shipments. One person signs for the receipt of the shipment and another person does the count of the merchandise. Now they need to have a bill of lading to go with the shipment. In the beginning the fraudsters had all the paperwork with the invoice, so it looked legitimate. They just shipped less carpet than what they billed. Later on they got lazy and billed for merchandise that wasn't shipped. This fraud required collusion between someone at the vendor and someone at Building 19. It's hard to detect fraud, especially when there is collusion. Tighter controls/better processes would have detected this one sooner. If they had thought the dollars were big enough they might have looked into it sooner, but no one must have thought it was big enough because they didn't do anything. It took a perceptive buyer to pull the plug on the issue.

We see at least three lessions learned worth sharing with you, to minimize your exposure to inventory scams off your back docks:

1. If you feel something is wrong or suspicious, go with your intuition and explore it further.
2. Check your current receiving process and consider a two-person verification
3. Double check for segregation of duties

Just thought we'd reach out to the A/P community to remind them about this year's annual IAPP Forum at the Gaylord Texan Resort in Dallas which is starting this coming Sunday.

The Forum is the foremost professional development opportunity for the A/P community and we strongly urge you or your staff to attend. There are three days filled with loads of valuable workshops, networking opportunities and entertainment. I always return from the trip with loads of insights and information that can help A/P departments improve their process and productivity.

We'll be there, as usual, and I invite you to call my cell phone at (617)875-5815 if you can make it and we can link up for lunch, or have a short discussion about your A/P department's payment challenges and see if we can help stop the payment leakage!

Dallas is a fun city and if you have not yet made plans to attend the event, there is still time to register.

Check signing security. In 1996 I took a job with a national employment services company with 8000 contract employees. I soon noticed they were using a rubber stamp to sign manual checks in the accounts payable department. I made a mental note to tell management this was an unsafe payment practice. Two weeks later a local bank questioned a big check that an employee was depositing. It turned out that he had been in collusion with another employee and had faked almost fifty checks totaling $375,000 using a rubber stamp and blank check stock that was stored in an unlocked storage cabinet. If you're using a rubber stamp to sign manual checks, destroy it right away! Never, never never use a rubber stamp to sign checks.

There are many security measures available for signing checks that are easy to use. If you need help with this area, give me a call.