With many of their teams now working remotely, association management companies and community associations are at increased risk for data breaches and check fraud that can erode trust and lead to financial loss.
How so?
Those relying on paper-based, manual processes are struggling to access the paper and people they need to work while protecting sensitive information from increased vulnerabilities. They are reliant on invoices being delivered to offices that may or may not be open, routing approvals to board members spread out across large geographic distances and sending payments via unpredictable mail services.
Fraudsters have their eyes on the gaps exposed, reportedly upping their game an estimated 6,000 percent since the start of the pandemic. They are using check fraud, phishing campaigns and malware, among other tactics, to access and compromise valuable information.
Paperless accounts payable (AP) can help association management companies mitigate these risks by providing powerful cloud-based technologies to eliminate gaps and replace vulnerable, paper based processes. It also creates efficiencies that help better manage association vendors and improve governance and control for managers and board members, alike.
Let’s take a closer look at how paperless AP can mitigate fraud risks for HOAs and their management companies:
1. Provides More Secure Payments Through E-Payments Options
The majority of HOA theft comes from check fraud, as checks are an easy way to replicate vital vendor and account information. A recent study by the Association of Financial Professionals reports that paper checks are the largest vehicle for payment fraud, affecting about 75 percent of businesses they surveyed.
By switching to an optimized and electronic bill pay system, you largely eliminate vulnerabilities associated with sending physical checks.
Automating AP virtually removes the paper and the manual processes associated with payments that are riddled with risks, replacing them with secure automated processes and offering encrypted and verified electronic payments like ACH and VCC that are routed digitally from one bank account to another through payment systems. Most use fraud monitoring tools that flag suspicious activity and avoid duplicate payments and invoices. The payment process is controlled from start to finish.
2. Creates Complete Visibility and 24/7 Access
When more than one person is paying invoices from slews of vendors, it’s tough to keep track of who’s been paid and for what service or product. Working remotely has made it especially tough and has opened up room for compromise.
A centralized AP process offers management companies real-time, anytime access to financial records and invoices for each property in their portfolio. Software can provide the function of customizable user accounts, enabling board members and other stakeholders to have complete visibility into their associations’ financial records. Teams can easily receive, track and approve invoices, check invoice and payment status, regardless of their location, and can scan for duplicates, errors and suspicious activity.
3. Improves Accuracy & Eliminates Errors
Management company AP staff work diligently to ensure invoices and payment information is recorded correctly, often by manually entering data into their ERP or relying on a spreadsheet to keep them organized and accurate. Despite their abilities and diligence, human work is prone to errors.
Work is more prone to errors when teams are working from home and distanced from their data sources, like office cabinets that house historical invoice information or folders containing the latest vendor insurance documents.
Optimizing tightens up the process and replaces labor intensive work, like invoice entry, expense coding and reconciliation, and in turn helps eliminate mistakes that are inherent to those manual processes. When AP is cloud-based and centralized, very little slips through the cracks, is duplicated or forgotten.
4. Offers Tighter Internal Controls
HOA management depends on controls like board approvals to securely process supplier invoices, pay bills and protect against fraud.
These controls are challenging to organize and maintain, especially when you add associations, work with new vendors and enforce controls from outside the office.
Centralized AP allows management companies to safeguard sensitive financial information by setting strict guidelines and controls around who in the organization can access it. They can embed payment controls, like segregation of duties and dual-factor authorization, into automated processes that happen repeatedly.
They can also add security layers that require double signature approvals and send alerts when suspicious activity is flagged.
Mitigating Fraud Risks and Creating a More Secure Payments System
Security vulnerabilities heightened by the pandemic won’t soon disappear. It’s predicted that working remotely will continue, making it especially important for associations and management companies to ensure that they have effective processes in place to safely operate remotely.
If you’re interested in building a secure payment system to prevent fraud in HOA management, AvidStrongroom can help. Learn more here.