Why the credit team is a valuable line of defence against fraud

Share:

Bad debt can have catastrophic consequences for any business, with different industries each having their own vulnerabilities. For example, for organisations that provide machinery, vehicles and other costly assets, the threat of these going missing is a serious concern. PwC’s Global Economic Crime and Fraud Survey discovered that in 2020, 47% of companies had experienced fraud in the past 24 months, with an average of six reported per company. Undoubtedly, the threat of fraud is growing.

To further complicate the matter, there are two types now posing the greatest risk to businesses: most commonly, fraudsters who are posing as existing businesses in order to transact with suppliers, but there is the creation of fake companies by criminals to contend with also. With this in mind, battling against fraud is clearly a multi-faceted undertaking, with financial departments and credit control teams often finding themselves acting as gatekeepers to these bad actors.

The first line of defence

For credit control teams, screening a potential customer or client is a crucial first step to detecting whether a fraudster is looking to gain an advantage. Sales teams can also play a role in advising in the case of a red flag or suspicious piece of information that doesn’t seem legitimate. Analysing bank statements, VAT numbers and registrations with a chamber of commerce is a good starting point and can reveal any data that may appear suspect.

There’s a range of tell-tale signs that an experienced credit manager can pick up on early, such as the order value being unusually high or the order address being from a country that the organisation usually wouldn’t do business with. Carrying out this due diligence at an early stage is even more important as non-refundable methods of transaction become more popular, such as bank transfer as opposed to PayPal or credit card payments.

Credit teams don’t have to tackle the screening process alone, and employing the help of technology is pertinent when considering that human error or oversight can be a possibility. Many current platforms don’t provide the assistance that credit managers need to analyse the data to detect for fraud. Tools such as Excel and legacy ERP systems often lack the ability to connect data internal points or integrate with real-time data from credit reference agencies and therefore are unable to provide the crucial end-to-end overview that could help the credit team make a decision on accepting a new customer. Without this real-time connected insight, credit teams will find it much harder to provide an agile line of defence against evolving fraud techniques.

RPA and intelligent automation

To ensure that credit teams have the correct tools in place to assist with battling fraud, implementing applications with robotic process automation (RPA) and intelligent automation (IA) can enhance a credit professional’s existing experience or skill set. A key part of this is integrating data from external risk management agencies such as Aon or Dun & Bradstreet, which can be done via API. For example, systems enhanced with RPA could play a key role in automatically verifying whether a potential customer that fills in a form on a business’s website is who they claim to be. The same applies for addresses, as systems could be connected to cross reference against agencies such as Companies House. Intelligent automation and RPA tools can help decipher whether the address is actually in the location claimed by the potential customer, while also being able to flag blacklisted accounts and fake businesses that have attempted to fraud companies previously.

Utilising such technologies not only allows the credit team to become a critical early line of defence against fraud by flagging bad actors, but also allows the process of screening a potential customer to be fast-tracked. In turn, whilst this speeds up the weeding out of fraudsters, it also enables the processing of a greater number of genuine transaction, benefiting the business doubly.

Defending against the threat of fraud in 2021

Pre-Covid, a traditional method of screening a new customer may have been a face-to-face meeting in a physical location. Ensuring the validity of a potential deal is therefore much more difficult during the age of remote working, where bad actors can pose as being employees of a fake company on social media platforms and present themselves in this way via video conferencing. The relevance of assistive technology in identifying fraudsters is therefore even more important, as many companies continue with a hybrid model of working post-pandemic and many industries choose to not complete business in-person.

Credit teams and managers are therefore a crucial component in a defence strategy against fraud. Rather than have technologies such as RPA and intelligent automation replace aspects of their role, these applications can help them make informed decisions on whether to do business with a potential client. If it seems too good to be true, it probably is, but in times of doubt, credit teams can utilise the right technologies to help inform on decisions and protect their organisation against fraudulent activity. This helps to reduce the incidence of bad debt and protects the business.

 

This blog was also published in Finance Digest.

Request a Demo
Want to see one of our solutions live?

Fill in your details below and we will contact you.

x
Want to see our risk management solution?

Fill in your details below and we will contact you.

x
Would you like to see PolicyManager live?

Fill in your details below and we will contact you.

x
Want to see our e-invoicing solution?

Fill in your details below and we will contact you.

x
Would you like to see MatchMaker live?

Fill in your details below and we will contact you.

x
Would you like to see CreditManager live?

Fill in your details below and we will contact you.

x
Would you like to see Collector live?

Fill in your details below and we will contact you.

x
Sign up for our newsletter

x