How to avoid falling prey to fraudulent invoices
With the issue of fraudulent invoices dominating recent headlines, it’s a timely reminder for business owners to take action to safeguard their company against this activity.
In March alone we saw a boss is facing jail for submitting more than £3 million of doctored client invoices, while a hotel manager was convicted for falsifying documents worth £350,000.
And these aren’t isolated cases. Nearly three-quarters of UK businesses have received bogus invoices, according to the Institute of Directors.
Flagging fraudulent activity can be challenging but there are precautions businesses can take to safeguard their company against risky invoices.
1. Always check if suppliers are legitimate
Firstly, it’s essential to always know who you are doing business with. There are a number of precautions businesses can take to assess whether their suppliers are legitimate. These steps include checking they’re registered, verifying endorsements and scrutinising their website. But, remember it’s not always good enough to check this information once. Sometimes fraudsters rely on your familiarity with invoices, and small changes such as an email address that now ends in .org instead of .com will often go unnoticed. Checking this information each time you process an invoice can highlight suspicious activity at early stage.
2. Train employees to spot fraud
Fraudsters are great at finding clever ways to con your staff. But, by educating your employees on the different types of invoicing scams and indicators of fraud, you can help to protect your business. Key things to look out for include:
- A not-so-crisp logo – often a result of fraudsters scanning legitimate letterheads
- A change in account numbers – does the font styling match the rest of the invoice?
- A change in contact information – encourage employees to always verify contact details
- Round pound value invoices – invoices in even amounts should be an automatic red flag
- Duplicate invoices – have you already received/paid this invoice?
3. Put plans in place
It’s important to implement policies on how to act in certain situations to limit the damage to your business. For example, all invoices should be checked for any of the red flags mentioned above, any change of bank account by a supplier should always be validated by a channel other than email, preferably through multiple contacts, and you should report all suspicious activity to the bank in order to block transfers. These procedures should be explained to your staff and strictly adhered to at all times.
4. Utilise technology
When your business deals with paper documents it can be hard to spot inaccuracies or unusual activity because there is so much paperwork to sift through. But, by digitising your invoicing process, you can reduce the risks to your business. Electronic invoices can flag errors and omissions so that those with inaccurate information are not processed.
5. Manage supplier data
Another benefit of digitising your invoicing process is that all of your supplier data will be in one place. This will make it easier to regularly review supplier lists, make sure information is up to date and highlight any of the red flags mentioned above. By doing this you can minimise duplicate suppliers, limit payment errors and ultimately save your business countless headaches and even some money.
This is by no means an extensive list but, by implementing better controls and improving visibility of your supply chains and payments, your business can reduce the risks of fraudulent invoices.