Fighting back against invoice fraud

Published On : 04/29/2019

By Neil Robertson, CEO of Compleat Software

The effect of invoice fraud on SMEs is rarely discussed – but collectively, it costs these organisations £9bn every year. And it’s not just SMEs that are affected – Patisserie Valerie recently discovered a £40m ‘black hole’ in its accounts, due in part to invoice fraud. So if you’re running a business, what can you do to fight back against it?

How invoice fraud happens 

Invoice fraud isn’t sophisticated criminal masterminds hacking into your systems and stealing all your data – it’s more about manipulating people through holes in the accounts payable process. One typical case might be a fraudulent individual sending an invoice marked late to your finance team with an amount that’s just low enough that nobody senior has to sign off on it. Other methods used by fraudsters involve replicating a legitimate invoice or inflating its price.

The common threat is inattention:invoice fraud operates on the assumption that nobody will look closely at the document or flag any problems. It’s therefore no surprise that businesses where the left hand and the right hand aren’t necessarily on speaking terms tend to be the most common victims.Poor internal communication can be very expensive.

And it’s not just SMEs who fall prey to such scams –Dell recently fell victim to £1m worth of invoice fraud over the course of five years. In another case, a single fraudulent invoice had been running for over a decade; while it was only a small amount in and of itself, the cumulative cost to the business was almost £10,000.

If it sounds like the kind of crime almost anyone could commit, that’s because it is. It exploits the simple fact that running a business involves spinning a lot of plates and keeping a lot of people happy – and that there often isn’t time to give innocuous-seeming invoices the attention they require.

Businesses must remain alert to the problem of invoice fraud and actively look to plug the holes in their processes. If you’re running a business, that means working together with your accounts payable department to manage invoices and creating a plan to spot fake invoices before they become financial losses.

Preventive measures

Paying forensic attention to your invoices will help, but businesses have finite people and finite time. When one person in the finance team is wearing multiple hats, you can’t reasonably expect them to devote the necessary time and resources to accounts payable. If the responsibility for handling and inspecting invoices falls on one person, unnecessary errors will occur.

Since invoice fraud exploits ignorance, education should be your company’s priority. Letting your team know about the problem, and how they can help counteract it, can go a long way: brief them on the dangers of invoice fraud and provide some best practice tips.

Technology can also help. If you haven’t got the internal resources to check every invoice, the right software solutions can speed up and simplify the process of safeguarding against fraudulence. While technology rarely slots in instantaneously, the time spent adjusting to it and learning how to use it will pay off in the long-term.

Procure-to-pay systems can help alleviate the frustration of day-to-day accounting: streamlining expenses, purchase orders, and of course, invoice management. You can usually pick and choose the features that are most relevant to you, but if you’re looking to fight invoice fraud specifically, select something with integrated verification.This essentially means that new suppliers must be vetted and authorised before invoices are approved – and that any attempts to change information are flagged in advance of payment.

Long-term protection

The responsibility of preventing invoice fraud often falls to the accounting team – accounts payable in particular. But invoice fraud is something that affects the whole business, and the whole business should be aware of it and work to prevent it. One route to stopping invoice fraud in its tracks is simple, open dialogue: you can’t deal with a problem if you don’t talk about it. The other is finding and implementing the right technical solutions. Embracing procure-to-pay technology will give you the time, the space, and the peace of mind you need to stop worrying about invoices and start focusing on what really matters.

Wanda Rich

Wanda Rich has been the Editor-in-Chief of Global Banking & Finance Review since 2011, playing a pivotal role in shaping the publication’s content and direction. Under her leadership, the magazine has expanded its global reach and established itself as a trusted source of information and analysis across various financial sectors. She is known for conducting exclusive interviews with industry leaders and oversees the Global Banking & Finance Awards, which recognize innovation and leadership in finance. In addition to Global Banking & Finance Review, Wanda also serves as editor for numerous other platforms, including Asset Digest, Biz Dispatch, Blockchain Tribune, Business Express, Brands Journal, Companies Digest, Economy Standard, Entrepreneur Tribune, Finance Digest, Fintech Herald, Global Islamic Finance Magazine, International Releases, Online World News, Luxury Adviser, Palmbay Herald, Startup Observer, Technology Dispatch, Trading Herald, and Wealth Tribune.