AP Fraud on the Rise: How Finance Leaders Can Stay Ahead

Fraud has become an increasing concern for AP teams, and the financial impact is quite significant. Criminals are taking advantage of various manual processes, outdated systems, and overworked staff. Finance leaders need to strengthen both their tech stacks and their teams in order to reduce the risk of costly mistakes in this climate.

The Scope of the Problem

The majority of organizations have dealt with attacks in AP security, or at least attempted attacks. In fact, 80% of businesses have reported attacks in the past year, which is 15% higher than it was the year prior. Organizations lose about 5% of their revenue each year due to fraud, according to The Association of Certified Fraud Examiners’ Occupational Fraud Report. That’s an average loss of $1.7 million per case, but global losses are estimated to surpass $5 trillion each year.

Fraudsters are now targeting companies more directly. “They know that employees are busy, that potentially there are weaknesses in their security. It is an easy way to take advantage of a company and earn a quick dollar,” John Gronen, CFO for Yooz pointed out in a recent ResourceFinancePro webinar.

How AP Fraud Occurs

The most common forms of AP deception include business email compromise, phishing, fraudulent invoices, payment diversion, and internal fraud.

• Business email compromise (BEC): Attackers impersonate an executive or vendor and request payments. Nearly 70% of organizations report experiencing these scams.
• Phishing: Emails disguised as urgent requests are used to capture login credentials or financial details.
• Duplicate or fake invoices: Fraudsters change invoice numbers or amounts slightly to avoid detection.
• Payment diversion: Criminals alter vendor account information so funds are redirected to them instead of the intended recipient.
• Internal fraud: Employees with access to approvals or payments set up fake vendors or approve invoices for personal gain.

In one example shared during the webinar, a project manager created a shell company and submitted fraudulent invoices for approval. Because the manager also approved them, the company lost $300,000 before the fraud was even discovered.

The Role of AI

Artificial intelligence is changing the fraud landscape. Attackers now use AI to create deepfake videos, mimic executive voices, and send personalized phishing emails that appear authentic at a glance. This level of sophistication makes fraudulent requests much harder to recognize, according to Gronen.

Fortunately, technology also provides us with tools to fight back. Automated AP platforms use AI to detect invoice manipulation, flag suspicious payment patterns, and verify vendor details in real-time. These tools present AP teams with the visibility and speed that manual processes can’t deliver.

Building Awareness in AP Teams

Technology works best when paired with a competent and well-trained team. Employees need to know what to look for and when to slow down the payment process. Small signs like a sudden change in a vendor’s account numbers, an invoice just below approval thresholds, or odd grammar in emails should raise questions.

“You have to create a culture of vigilance, where employees feel empowered to question suspicious transactions without fear of repercussions,” according to Cody Manning, Chief Sales Officer at Yooz. He stresses the importance of employee confidence in reporting suspicious activity.

Practical steps, which include setting up code words for high-value payments or requiring call-backs on vendor account changes, can prevent significant financial (or data-related) losses. Regular training also helps teams take notice of red flags before payments have a chance to be approved.

The Limits of Manual AP Processes

Manual data entry, email-based approvals, and inconsistent invoice formats create opportunities for fraud. Fraudulent transactions may go undetected for weeks when approvals rely on informal sign-offs. By contrast, automation enforces segregation of duties, tracks every action within an audit trail, and verifies data before payments are processed.

Automating AP also shortens invoice processing time from 8 to 12 minutes to as little as 1 to 2 minutes. This gives AP staff more capacity to review questionable transactions, contact vendors directly, and focus on higher-value work. The result is fewer errors, stronger prevention, and improved morale among employees who are no longer burdened by repetitive tasks.

Strengthening AP Defenses

The evidence is clear. Fraud attempts are rising, and the methods are becoming more sophisticated. Businesses that continue to rely heavily on manual AP processes face a much greater risk of financial loss. Combining automation, clear approval workflows, and regular staff training provides the strongest defense.

As Gronen summarized, “What you are looking for is an ability to close as many of those doors as you possibly can to keep the fraudsters out.”