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The Association of Certified Fraud Examiners has said that 5% of all company revenue is lost to occupational fraud each and every year, and that the average cost to businesses now stands at a staggering $150,000.

Fraud is endemic and paper is at the very centre of the problem. Why do I make this strong claim? Because the sheer reality is that the medium facilitates fraud by making concealment easier over extended periods of time. Think of the Enrons of the world, where extensive illegal and fraudulent activities were buried in paper over many years.

In fact, my personal experience tells me that such illegality is sadly more widespread than I thought at the start of my career; I have witnessed multiple instances at clients. But who are the likely perpetrators of this chronic fraud? The most likely perpetrators are very often the long-term, established members of staff, who may operate in cahoots with externals, even ostensibly trustworthy suppliers or partners.

Human nature is unfortunately flawed, and when presented with easy access to a good colour photocopier, the opportunity to generate a convincing fake invoice is a genuinely inviting one for some. So how does paper contribute to this problem? The reason is two-fold. First, metal cabinets are notoriously very difficult to search and can easily conceal all manner of corporate malpractice. And second, non-electronic filing systems have no audit trail of activity, and so are impossible to search comprehensively and spot the patterns that would set alarm bells ringing.

Technology, however, can make all the difference. Here's an example of these discovery methods being applied in practice. One of our customers in the building and construction industry discovered a substantial amount of fraud taking place when it started to match delivery notes against physical goods coming in. It became apparent that things had been claimed for that simply never showed up. Ultimately, £100,000 worth of fraudulent activity came to light after all the paperwork was scanned. The real giveaway? The disparity in the order numbering: something that would have been far harder to track working off the paper documents alone.

These fraudulent accounting practices were only obvious when the system was automated, becoming at a stroke more visible and transparent, both internally and externally. With document management technology, you can have an infrastructure that supports a three-way match between orders, payments and delivery, tying your core ERP into all of your invoicing processes.

With a move to paperless you can avoid a huge chunk of all the fraud the Association of Certified Fraud Examiners found - that needlessly missing 5%.

ERROR PRONE
Keeping tight control of your cash flow, especially in economically challenged times, is good financial control policy. However, you may sit on an invoice for so long that the supplier re-invoices - and you risk paying the second invoice, as well as the original bill!

It may sound like an unlikely scenario, but it's unfortunately far too common. I term this human accounting error as auto-fraud - namely fraud against yourself. Double invoicing is, in fact, such a big issue for some big firms that they have in-house staff whose sole job is to examine the paper pile and check for duplicate invoices and manually match POs.

That's a very poor use of your staff's time, skills and abilities - plus it's an inefficiency that can easily be rooted out if you put a proper process in place supported by Enterprise Content Management (ECM) to match your credits and debits. We'd also recommend moving to bigger orders with a smaller set of core suppliers, as that approach plus paperless invoicing is a real step to true business efficiency.

TAKE STEPS
So in conclusion, if you want to stop that 5% leaking out of your profits every year, there's only one way forward: remove the paper chase. Do that by investing in systems and processes to expunge all paper, checking your processes and flushing out any rogue invoices or suspicious internal behaviours.

At the same time, get more digital to speed up your auditing procedures, and if you prefer to hold on to your cash, be realistic about the double-invoicing risk and put the right checks in place.
More info: www.easysoftware.co.uk