Are You at Risk for Accounts Payable Fraud?
Short answer: yes.
by Ashley Poynter
Content Manager
PaymentWorksWhat is Vendor Fraud and How Do Manual Processes Put Me at Risk?
Your CFO walks in holding a printout of a $98,000 wire transfer. The problem? The payment didn’t go to a vendor—it went to a fraudster impersonating one. And the worst part? No one noticed until the real vendor called asking why they hadn’t been paid.
Unfortunately, this scenario is far from fiction. Accounts payable fraud is a multi-billion dollar issue that hits organizations of all sizes. According to the Association of Certified Fraud Examiners, businesses lose 5% of revenue annually to fraud (not counting additional losses tied to things like reputation damage and lost productivity)—and AP fraud plays a starring role in that statistic.
From forged invoices to business email compromise (BEC), these schemes prey on one thing: weak processes. If your vendor onboarding still relies on spreadsheets and your approvals go through email threads, you might be rolling out the red carpet for fraudsters—whether you realize it or not.
Let’s break down how accounts payable fraud works, why it’s so prevalent, and what you can do to keep your organization out of the headlines.
Table of Contents
The Anatomy of Accounts Payable Fraud
Accounts Payable Fraud Red Flags: Signs You’re at Risk
Fortifying Your Accounts Payable Fraud Defenses: Best Practices
The Role of Technology in Mitigating Accounts Payable Fraud Risk
Are You at Risk for Accounts Payable Fraud?
Get Ready for Vendor Management Day 2025
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The Anatomy of Accounts Payable Fraud
To understand accounts payable fraud, you first have to appreciate the creativity of criminals. They’re not just forging checks anymore—they’re crafting elaborate schemes that exploit everyday business practices.
Business email compromise (BEC)
BEC is like catfishing, but with fewer romantic undertones and much higher financial stakes. A fraudster poses as a trusted vendor—or even an executive—using a spoofed email address to request an urgent payment or a bank account update. If your team is rushed, distracted, or simply unaware, that one email can redirect tens or hundreds of thousands of dollars to a criminal’s account.
Invoice fraud
This one’s a classic. A vendor (or someone pretending to be one) submits a duplicate invoice—or an entirely fictitious one—for goods never delivered or services never rendered. If no one double-checks against purchase orders or delivery confirmations, the invoice gets paid.
And just like that, you’re out thousands of dollars.
Vendor impersonation
Here’s where things get bold: scammers create entirely fake vendors, complete with phony W-9s, realistic company names, and banking details. These phantom vendors get set up in your system and start submitting invoices. Since they’re “in the system,” payments are processed without suspicion—until someone asks what, exactly, they’ve been paying for.
Why it works
These scams work because accounts payable teams are busy, overwhelmed, and often under-resourced. Manual processes, overreliance on email, and lack of standardized verification steps create the perfect storm. Add in the occasional pressure to “pay this now” from a seemingly senior exec, and it’s easy to see how even savvy teams fall for sophisticated fraud attempts.
Accounts Payable Fraud Red Flags: Signs You’re at Risk
Now that you know how accounts payable fraud happens, let’s talk about the red flags that signal your organization might be next.
Manual processes
If your vendor records live in spreadsheets, shared folders, or a patchwork of systems, you’re at risk. Manual data entry means more room for error—and fraudsters love exploiting those errors. Paper-based or email-based approvals only add fuel to the fire.
Lack of segregation of duties
When the same person can onboard a vendor, approve invoices, and process payments, you’re giving them (or anyone impersonating them) unchecked power. That’s like giving a teenager keys to the sports car, your credit card, and no curfew—something’s bound to go wrong.
Inadequate verification
If your vendor onboarding doesn’t include formal steps like bank account verification, tax ID validation, or confirmation calls, then it’s only a matter of time before a fraudster slips through.
Pressure to expedite payments
Fraudsters thrive on urgency. If your team frequently hears things like “We need this payment processed today,” and shortcuts become the norm, you’re skipping safety for speed. And that’s exactly what these scams count on.
As Jim Vogt of the Fraud Protection Institute highlights, most organizations incentivize efficiency, not caution. This, plus a lack of education for people who are on the front lines, can lead to bad outcomes in the fraud battle:Â
Recognizing these red flags is the first step to reducing your exposure. The second? Taking action to address them.
The Cost of Complacency
Some organizations assume they’re too small to be a target—or that they’ve never had an incident, so their current process must be working. That kind of thinking is a costly gamble.
Financial losses
Let’s get real. The dollar amounts involved in accounts payable fraud can be staggering. Cities, universities, and private companies alike have lost hundreds of thousands—sometimes millions—through fraudulent wire transfers and unauthorized payments. Once that money’s gone, it’s almost impossible to recover.
Reputational damage
When news breaks that your organization fell for a scam, it’s not just an internal matter. Stakeholders, partners, and vendors start to question your reliability. You may even lose business because you’re seen as high-risk.
Operational disruption
Fraud incidents don’t just drain bank accounts—they drain teams. Once fraud is discovered, it’s all hands on deck to investigate, fix processes, respond to auditors, and rebuild trust. That’s time your team could have spent on growth, innovation, or literally anything else more productive.
Ignoring the risk of accounts payable fraud doesn’t make it go away—it just makes it more likely to strike when you’re least prepared.
Fortifying Your Accounts Payable Fraud Defenses: Best Practices
Thankfully, there are proven ways to reduce your risk and create a fraud-resistant AP environment. Think of this as your starter pack for AP security.
Implement segregation of duties
Divide responsibilities across multiple team members. The person who sets up the vendor shouldn’t be the same person who approves invoices or processes payments. Segregation adds friction—in a good way—that makes fraud harder to pull off.
Automate vendor onboarding
Manual forms are a fraudster’s playground. Switching to an automated onboarding platform adds structure, transparency, and security to the process. Systems like PaymentWorks collect, validate, and verify vendor information, so you’re not relying on gut checks or crossed fingers.
Establish multi-level approvals
High-value transactions and vendor changes should never be approved by just one person. Build in tiered approvals that require multiple eyes—and preferably from different departments. It’s a little extra work, but it could save you six figures.
Regular audits and training
Schedule quarterly reviews of your AP process and look for anomalies. And don’t forget to train your team. They should know what a phishing attempt looks like, how to verify a vendor, and when to raise a red flag.
Fraud prevention is about consistency, not complexity. A few smart practices can close most of the doors fraudsters are hoping you’ll leave open.
The Role of Technology in Mitigating Accounts Payable Fraud Risk
Manual processes are no match for today’s sophisticated fraud attempts. That’s where technology steps in—not just to make life easier, but to make your entire AP operation more secure.
Centralized vendor portals
A vendor information portal is your first line of defense. It centralizes vendor onboarding, enforces verification steps, and eliminates the chaos of chasing documents through email. Portals standardize workflows so every vendor goes through the same checks—every time.
Real-time verification tools
Modern AP platforms can instantly validate bank account ownership, tax ID numbers, and business credentials. These tools make it much harder for fraudsters to slip fake or outdated information past your team.
Audit trails and reporting
Every action taken in a digital system is logged. Who approved what, when, and why? That data is your shield when questions arise. It helps with internal accountability, external audits, and proactive fraud detection.
In short, technology doesn’t just streamline your AP process—it builds the fortress around it. If you’re still relying on spreadsheets and inboxes, you’re fighting 2025’s fraud threats with 2005’s tools.
Are You At Risk for Payables Fraud?
If your vendor management process involves manual steps, unverified emails, and a lack of checks and balances, the answer is likely yes. But here’s the good news: AP fraud is preventable. With the right mix of technology, training, and process design, you can dramatically reduce your exposure.
Start by reviewing your current practices. Are vendor changes verified? Are duties separated? Do you have an audit trail? If not, it’s time for a reset.
Invest in tools that give you control and visibility. Automate what can be automated. Educate your team. And remember—every step you take toward tightening your AP process is one step further from the fraudster’s bullseye.
Because in the battle against accounts payable fraud, proactive beats reactive—every single time.
Get Ready For Vendor Management Appreciation 2025
The Vendor Management Appreciation Day (#VMAD) celebration continues in 2025! And you should join us.Â
Why? Because there’s no expiration date on honoring one of the most important, under-recognized roles across industries: vendor management.
Join us in observing Vendor Management Appreciation Day (VMAD)! We’re gearing up for the 2025 celebration, and we want you to be a part of it!
VMAD is a new holiday geared toward unifying vendor management professionals and celebrating innovation in the field.
Moreover, we’ve released gifts each month to help you supercharge your vendor management efforts. Additionally, we’re planning some awesome events so everyone can connect and celebrate the important, strategic role of vendor management.
In the meantime, learn more here, and grab some free vendor management goodies.
Want Help Aligning Teams On Accounts Payable Fraud Prevention?
Explore our blogs below. They’re filled with action items you can implement right away.
Why a Weak Vendor Identification Process at Onboarding Makes You Vulnerable to Fraud
Vendor Verification: How NOT to Do it and What to Do Instead
The New Face of Vendor Fraud Cases
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