No one is immune to invoice fraud. Criminals are becoming sophisticated, so some scams may not be obvious, even for seasoned professionals. Many businesses in Las Vegas today are concerned about invoice fraud's prevalence and the surprisingly convincing manner in which it is carried out. It is becoming a danger that cannot be ignored, even when you think that the security of your accounts payable process is watertight.
Although the advancement of information technology and computer science provides businesses with more secure and efficient solutions to manage fraud, some companies are yet to switch from the traditional manual payment processes entirely, and fraudsters are taking advantage of this. Additionally, even with businesses aware of fraud and scams that may affect them, many are yet to take any preventive action, which explains why invoice fraud still has ground.
Invoice fraud happens when a scammer or hacker poses as a vendor by sending you a fake invoice or any other payment request, such as changing payment details, hoping your business will comply and pay. Unlike email scams and other attacks, invoice frauds are highly targeted. Typically, the fake invoice is generated with knowledge about your business relationship with suppliers.
The fraudsters don't mind the work and precision that goes into planning the fraud because, ultimately, criminals can make a lot of money if successful. For example, we recently learned that tech giants Google and Facebook were scammed out of $123million. This shows how complex this type of fraud is and how it challenges all organizations regardless of the size and security measures.
There are varying levels of sophistication applied in perpetrating invoice fraud. However, the ultimate goal is to get a phony invoice past the accounts payable team.
Invoice frauds are often well-executed and hard to detect. A third party will submit a fake invoice to your company, and you may think you are genuinely paying for goods or services received while sending funds to a scammer or hacker. Although most scammers usually play a game of chance with their luck, they typically invest significant time learning about your business before making you a victim. A study by the Association of Certified Fraud Examiners revealed that fraud plots could take an average of 16 months from the initial research to the time it is carried out. Their research mainly focuses on identifying your regular suppliers and their typical invoicing patterns so that the fake invoice looks as genuine as possible.
Knowing some common types of invoice fraud will give you a better idea of how to prevent them.
Prices of the invoices are inflated to get you to pay more than you are supposed to. Usually, the amount is not significantly increased to avoid raising suspicion. The invoice could be from a genuine vendor wanting to rip you off or a scammer who has not supplied your business with any goods or services.
This is the most common type of invoice fraud. They appear to be charging for legitimate goods or services, but they delivered nothing. The scammers hope that no one will question the invoice and ultimately get away with reaping where they did not sow.
This involves both internal and external parties to the business. You get more than one invoice for a service or goods.
You are at an increased risk of falling prey to an accounting scam when there are some weaknesses in your accounts payable processes. Some of the issues that make your business more vulnerable include:
To protect your business from invoice fraud, here are a few things you can do:
Invoice fraud can be costly for your business, so it makes sense to invest in prevention and protection measures instead. Automating the accounts payable process can cover some loopholes that fraudsters take advantage of to commit invoice fraud. Accounts payable automation takes over verifying invoice information and ensuring that the services or goods being paid for are received. In addition, it allows the accounting team operates more efficiently by saving time and reducing errors.
This sounds like the bare minimum every account payable team should be doing. However, many businesses still rely on just one person to authorize and verify everything, increasing the chances of an error. Having more eyes check an invoice and payment will increase the chances of spotting any suspicious activity before it is too late.
The only way to determine if something is odd with your accounts is by tracking and monitoring all invoice activity. Tracking lets you know the number of invoices you receive, how much you pay, and whom. Therefore, if something is not adding up, you can always spot it in good time and make the necessary changes.
You can prevent invoice fraud by selecting the vendors you bring into your business. Make sure to do several steps of due diligence checks to ensure that the vendor is legitimate. First, they provide essential documents like proof of incorporation, TAX/VAT number, and contact and payment information. Then, confirm with the vendor before authorizing payment in case of any changes, such as new payment details. Alternatively, you can use automated tools to flag any payments or invoices that seem off or new in your system.
Orbis Solutions Inc. can help secure your business against invoice fraud by improving your email security measures. Emails, the most common mode of communication for business, can be an avenue for phishing and other cybercrimes supporting invoice fraud. Contact us today to find out more about how we can cushion your systems so that all your business communication and information stay secure.