Simple Controls That Protect Your Cash
Many businesses assume payment errors or fraud are rare. In reality, Accounts Payable (AP) is one of the highest-risk areas in any organisation.
Money is leaving the business, often with limited scrutiny, handled by junior staff, and exposed to both simple mistakes and deliberate fraud.
Let's look at ways leaders reduce risk through well-designed controls.
What “good” looks like
A well-controlled AP function achieves three outcomes:
- Only valid invoices are paid
- Payments are accurate and properly authorised
- No single person controls the process end-to-end.
Everything else flows from these principles.
1. Start with obligation: “Do we actually owe this?”
Before any invoice is paid, the first question should be simple: are we genuinely obligated to pay it?
This is where most control failures occur.
What to put in place:
- Structured approvals: Every invoice should be approved by someone who understands the purchase and has the authority to approve it.
- Approval thresholds: For example, smaller invoices approved by managers, larger ones escalated to directors or owners.
- Department ownership: Approvals should sit with the relevant team, not just finance.
A common issue we see is finance approving everything. That’s convenient, but it weakens control.
Purchase order matching is also highly effective:
- Service businesses: aim for at least invoice-to-PO matching
- Product businesses: include delivery confirmation or inspection
This helps prevent paying for goods not received, incorrect pricing, or duplicate billing.
2. Get data entry under control
Even valid invoices can create problems if the data is handled poorly.
Key areas to focus on:
- Two-factor authentication (2FA): Now essential for finance systems to reduce fraud risk, particularly email-based scams.
- Timing of data entry: Recording invoices after approval is generally slower, but significantly safer.
- Consistency: Standardise invoice numbers, supplier names, and data formats to avoid confusion and duplication.
Small inconsistencies can lead to big issues over time.
3. Strengthen vendor management
Vendor setup and maintenance is often overlooked but it’s a major risk area.
What good looks like:
- Complete supplier records (bank details, tax information, agreements)
- A clear onboarding process
- Documented payment terms
The most critical control here is vendor change management.
Any change to bank details should require dual approval. No exceptions.
This is one of the most common entry points for fraud.
4. Lock down payments
This is where mistakes become real losses.
The most important control: separation of duties.
No one person should be able to approve, process, and pay an invoice.
At a minimum:
- One person approves
- Another processes the payment
If one person controls everything, the risk increases significantly, regardless of trust.
Additional safeguards include:
- Two signatories for manual payments
- Secure storage of banking details and payment tools
- Clear audit trails of who did what and when
5. Use technology properly
Many businesses already have AP systems in place, but aren’t using them effectively.
Well-configured systems should:
- Automate approval workflows
- Route invoices to the right people
- Flag duplicates
- Enforce approval thresholds
- Maintain audit trails
The value isn’t just in having software, it’s in setting it up correctly.
A practical way to approach Accounts Payable
If you’re reviewing your AP process, start simply:
- Who approves invoices today?
- Can one person set up a supplier and pay them?
- How are bank detail changes controlled?
Gaps usually become clear very quickly.
From there, prioritise high-impact fixes:
- Separation of duties
- Vendor change approvals
- Clear approval structures
These deliver meaningful improvements without overcomplicating the process.
The commercial impact
This isn’t just about compliance.
Strong AP controls lead to:
- Fewer cash leakages
- Better working capital management
- Stronger supplier relationships
- Reduced fraud exposure
In short, they directly support profitability and reduce risk.
Need help reviewing or strengthening your Accounts Payable processes? Get in touch with Alliott NZ in Newmarket Auckland.
