Guest contributor Andrew Jesse, VP, Basware
Invoice fraud is one of those topics that most CFOs are aware of, but one which few ever think they will really be targeted by. You know who your suppliers are, and you have stringent policies in place for the creation of new accounts, so it would be extremely difficult for an unknown invoice to slip through the net. However, it’s perhaps the invoices from your suppliers that maybe have some added costs that seem legitimate upon first glance that you need to watch out for. And it’s both internal threats as well as external threats that you need to be aware of.
Invoice fraud can occur when a legitimate invoice from a supplier is intercepted by fraudsters. The invoice then has fake bank details inserted and then carries on its journey. The business receiving the invoice will have no evidence that it has been tampered with and will unwittingly pay the amount outlined to the fraudster. In most cases, it’s not until the supplier chases for payment that the fraudulent activity is even noted. In some cases, invoices are not intercepted and fraudsters simply send false invoices and threaten that non-payment will affect credit rating. Another instance in which fraud occurs will be through an inflated invoice.
Within the UK, last year saw an increase in invoice fraud especially in the construction sector. One construction business lost a reported £1.1 million to invoice fraud and The National Crime Agency was forced to issue a fraud alert to the industry. Invoice fraud impacts many businesses across the world and the larger the invoice volume/supplier base, the more chance of exposure you have. Thinking that this issue will not affect your business is simply not sensible.
Fraud takes place on a day-to-day basis and must be tackled as business as usual. Anywhere where there are weaknesses in your accounts payable process offers an opportunity for fraud. Nevertheless, fraud prevention is within your control. The adoption of electronic invoicing is an effective step in helping you to safeguard yourself against potential fraudsters. Firstly, the extra security measures put in place with e-invoicing make intercepting an invoice much more difficult. Similarly, through supplier networks made available through e-invoicing, suppliers can easily view the status of their invoice and are able to see if anything had been amended. Companies can also set rules to their e-invoices, stating that an invoice can only go through with the approved banking information for example.
Duplicate invoices also represent a large element of fraudulent activity overall, resulting in a business paying a supplier for the same item more than once, often by mistake, sometimes as a result of fraud. The advent of e-invoicing automates the checking and filtering of invoice numbers, making it less likely for duplicates to slip through.
Although there are no guaranteed ways of totally eliminating invoice fraud for your business, the implementation of e-invoicing is a positive step towards achieving this goal. The benefits of e-invoicing certainly outweigh traditional paper invoicing and provide many controls and rules to prevent fraud. Find out more on how you can safeguard yourself against invoice fraud, ‘avoiding the f word’ here.