Companies without a digital invoice processing system in place are leaving themselves open to invoice fraud. Over the past year, nearly a third of businesses have been targeted.
Fake invoices often appear to be genuine and are easily processed by employees if the amount involved is below a company’s payment threshold.
Types of invoice fraud
Common types of invoice fraud include:
- a false invoice for non-existent goods or services;
- duplicate invoices; or
- alteration of existing invoices, e.g. bank details are changed which could indicate email hacking has taken place.
Fake invoices can be harder to identify if they appear to be from a business that your company has previously dealt with.
The threat of invoice fraud is not always external. Companies also need to be wary of internal threats, which can be much more difficult to identify. Typically, a senior employee will swap the bank details on an invoice to divert payment to their own account. In a recent case involving a member of staff, a public limited company lost £660,000 due to 29 fake invoices in one month.
Invoice fraud is not just a case of suffering financially. It can also harm business relationships, brand reputation and impact staff morale, especially among the team that fell for the fraud.
Prevention
Updating to a digital processing system will mean that invoices are automatically compared with orders and payment information, preventing most types of fraud:
- If all suppliers are required to use your digital system, potentially fraudulent traders are prevented from joining the trading network by carefully managing the onboarding process. There is then little scope for fake invoices.
- You will also find that the benefits of digital invoicing extend well beyond fraud prevention. For example, invoice due dates will not be missed, the number of errors will be reduced and cash flow forecasting improved.
Updating to a digital system also means supplier invoices will be conveniently stored for easy retrieval in the future.
The British Business Bank’s guide to how to avoid invoice fraud can be found here.
Talk to Jamie@ammu.uk who can help digitise your systems.