[Editor’s Note: Today’s article is a guest publication from Thierry Jaffry, Vice President of Operations at Simetryk, a Montreal-based provider of supplier information management solutions. Ardent Partners is happy to review and feature guest publications from authors across the procurement and supply management industry. If you or someone you know would like to become a guest contributor, please contact us at editor at cporising dot com. Thanks!]
Many articles have been published about procurement fraud recently, for example through banking account number modification or fake purchases. It has become essential to set-up solutions to mitigate this risk. This article will provide you with 6 propositions to help you prevent procurement fraud.
- Split and define job responsibilities such as finance, buyer, AP clerk, etc. The Segregation of Duties (SOD) is one way of ensuring that an employee doesn’t have full control of the procurement process. Auditors like to focus on SOD.
- Build workflows for each scenario, so there is always an approver different from the requester. Pay attention to exception management process, where fraudsters generally find breaches (for example, if there’s a procedure for exceptional purchases that bypass the controls)
- Put banking information modification under maximum supervision. The best way to do this is to set up a centralized vendor data management tool, where only specific users would have read/write access to this sensitive data and a specific workflow before publication in the financial ERP.
- Authorize payments only to suppliers that are validated through an activation process. It is key not to allow the supplier ad-hoc creation directly in the ERP.
- Set up a 3-way match reconciliation for each invoice, to secure matching between ordered, received and invoiced (paid) amount.
- Set up a strong Spend Analysis tool with specific alerts, such as invoices without PO or budget consumption, in order to control any unusual spend behavior.
These six simple steps have helped many large to medium size companies to minimize procurement fraud. We strongly recommend you to review your procurement processes at least once per year in order to ensure that actions are planned to mitigate the risk.
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