baking bad

Baking Bad – How invoice approvals can prevent fraud

The recent events at Patisserie Valerie sent a shock wave through the business community. One minute all is supposedly well, and the next there is a multi-million-pound black hole with investors desperately trying to fund short term cashflow issues.

It’s no surprise really that the chain has now gone into administration.

What’s worrying here though is the news that fake invoices were spotted and alerted by HMRC. This must be one of the biggest causes of fraud in any organisation today and never has there been more pressure on accounts payables to question every single invoice being received or presented for payment.

But how do you maintain operational efficiency and diligence yet provide scrutiny when you are processing so many payments each month? The answer of course, is good internal processes and good software.

There are five elements to the buying process that can help cut down on fraud

  • Due diligence on new suppliers
  • Purchase requisitions and electronic approval processes for every request
  • Purchase orders
  • Invoice and order matching
  • Electronic Invoice approvals when thresholds are breached

The first step here is to move away from any paper-based processes. They simply aren’t secure enough or fast enough in today’s multi-location or home-working environments.

Next choose software like Zahara that allows any newly registered suppliers to create email alerts and then use multi-step approval processes for both requisitions and purchase invoices. A good approval system will allow flexible rules to be created such as incorporating more approvers for more expensive purchasers. Recognising when the requestor is also an approver and switching to a pre-set delegate will help prevent management or C Level fraud, which looks to have been the problem at the the tea and cake chain.

Switching to using purchase orders with your key suppliers and making sure they only supply based on receiving an actual PO document further reduces the potential for fraud. Use my name “Dave” as the PO number just isn’t acceptable or sensible. Most companies adopting a new “purchase to pay” solution will write to all their suppliers, stating their terms and what their buying behaviour will now look like.

With flexible IT security like biometrics in phones and two-factor authentication, the future looks resilient for those who move over to approval solutions. None of us want to get an email like Luke Johnson did, so we should all take steps today for a safer stronger business of the future.

Zahara's Purchase Approvals Platform can help accounting professionals and busienss leaders to get a grip on their company wide spending and protect their business.


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