In our latest blog from Apron, the team reflect on the risks to bookkeepers making client payments - and what you can do to mitigate that threat.
At Apron, we spend a lot of time on the road, and the more we speak to bookkeepers, the more we realise just how many are starting to offer payments as a service to clients.
It’s fantastic, but there is a problem. The tools that bookkeepers use to manage client payments, or offer payments as a service, are well and truly broken.
Why? Managing payments for, say, half a dozen or more clients introduces a level of complexity that, in our view, presents the potential for errors and risk.
Just look at what’s involved in managing so many accounts. It’s not uncommon for bookkeepers to have to maintain a roster of passwords shared among team members, along with a sea of account numbers and references that can all blur together by the end of the month.
And let's not forget the considerable time-drain that is updating spreadsheets after each transaction. In the end, it amounts to a significant chunk of hours wasted every month.
Let's look at some of the ways your practice is at risk by managing client payments
Fraud costs businesses millions
Mistakes in payment processing can have dire consequences for both bookkeepers and their clients. Moreover, with an estimated £1.2 billion lost in the UK due to fraud in 2022, it's evident that we need a better, safer way for bookkeepers to manage payments.
But before getting into solutions, let’s look at three reasons why managing client payments without the right tools can create risk for your practice.
Payments ending up in the wrong hands
Picture this, it's a Friday, the end of the month, and for a brief moment, ABC Mechanics looks a lot like ACB Machinery. Before you know it, you've made a payment to the wrong supplier. Enough to make you pause for thought, isn’t it?
While you might eventually recover that money, it comes at a cost. You'll need to liaise with the bank, file a claim, and hope the unintended recipient is willing to return the funds. All the while, your client's small business suffers.
Invoice fraud: A nightmare for small businesses
Have you ever encountered invoice redirection? It's a scheme by which fraudsters trick you into altering the bank details for a payment on an invoice.
This type of fraud results in legitimate invoices from suppliers going unpaid, leaving businesses out of pocket.
A report by UK Finance in 2022 revealed that malicious redirection scams, also known as invoice fraud, amounted to £56.7 million in 2021, with an average loss exceeding £14,000.
For a small business, a loss of £14,000 can be a disaster, potentially even leading to the business's downfall.
This kind of fraud often occurs when email accounts are compromised, which is the primary means of communication used by firms and their clients for managing accounts payable.
Until the introduction of 'Confirmation of Payee,' there were no adequate tools available to mitigate the risk of invoice fraud. What's more, this technology was initially accessible only to financial institutions such as high street banks.
This is one of the reasons why we advocate against manually accessing client financial accounts to pay bills. It’s just too risky.
More accounts, more problems
We touched on this in the introduction, but it's worth reiterating because human error, albeit unintentional, is one of the most significant risk factors in this context.
Cumbersome logins, missing security devices, mislaid passwords, changing bank policies, and the potential for distractions from cakes, tea, and Amazon deliveries—all these factors make you just one misstep away from missing an essential payment or transferring money from the wrong account to the wrong supplier.
Such a mistake could result in significant financial repercussions for your client, and carry major reputational risks for you.
Open Banking isn’t always the answer
Open Banking was introduced with the aim of speeding up transfers and payments. While it has been beneficial in some ways, in other respects, it has only added to the complexity.
In recent years, there has been a surge in the utilisation of Open Banking. However, it does not sufficiently mitigate the risks associated with making payments on behalf of multiple clients.
For example, some banks, such as Metro, Mettle, and the Co-operative Bank, don’t permit payments via Open Banking when making individual payments. The concept of 'open' banking is not as open as one might assume.
And the challenges multiply when attempting to make bulk payments with major financial institutions like HSBC, Starling, Monzo, Barclays, and others. Some of these places either lack support for bulk payment functionality or impose restrictions on the number of payments within a single batch.
Additionally, limitations may extend to the amount and timing of transactions, as seen with HSBC's requirement to schedule bulk payments 48 hours in advance.
So, what's the solution?
Apron: A safer, all-in-one solution
While most solutions on the market address only specific aspects of the problem, Apron simplifies the entire payments process. For starters, this means you won’t need to waste time constantly logging into client bank accounts.
Here's what makes Apron different:
Inside Apron you’ll find your Hub. From here, you can add clients and team members, and create payments.
Select who to pay, who approves a payment, and who makes a payment.
Payment is made without you ever having left Apron, and because Apron is synced in real-time with your Xero or QuickBooks account, reconciliation is automatic.
No bank access or wallets required — No top-ups, and no need to access a client’s bank account.
No more copy-pasting — Apron’s Snap! feature automatically captures account details, sort codes and addresses from invoices and other documents.
Pay with confidence — ‘Confirmation of payee’ flags appear if for some reason the payee’s account details don’t match up. And, being able to hide Direct Debit payments means you won’t pay twice.
Using Apron to manage payments as a service means more time saved, greater functionality in terms of what you’re able to do for clients, and less risk overall.
Want to learn more about how Apron is changing the accounts payable process for the better?
Visit getapron.com and book a 1:1 demo.