Statistics show that more than 20% of businesses receive fake invoices each year. While you can’t stop them being sent, what steps can you take to avoid inadvertently paying them?

A simple but effective scam

As fraud goes it’s about as simple as it gets: send a fake invoice to a business and wait for them to pay. A survey by a major business software provider found that around 21% of businesses acknowledged they had received a bogus invoice. However, only a fifth of those admitted to paying them; the true number is believed to be greater as many businesses will have paid fake invoices without realising it.

Small amounts add up

The fraud usually involves entirely fictitious supplies of goods or services from a made up business. The amounts are usually small; say for stationery supplies or a routine service such as advertising or a registration fee. Fraudsters are aware that some firms have policies where low value bills receive less scrutiny than larger ones and so are approved for payment on the nod.

Trap. Don’t be fooled by the fact that some invoices might carry genuine names or details of persons in your organisation. It’s easy for someone to phone and ask the name of the manager or someone likely to have authority to place an order, and then add the details to the bogus invoice.

Tip. If you don’t have one, create a purchase order system for all supplies regardless of their value. This will involve allocating a purchase order number to each order for goods or services. Your accounts department must be advised not to pay an invoice unless it has a genuine number. To avoid trouble with your suppliers make sure that they are aware of this.

More complex scam

A popular scam involves fraudsters establishing who provides your firm’s cleaning services, for example. This is easily done through a series of phone calls, which can be as seemingly innocent as asking your receptionist a few questions. They then contact your accounts department and provide a false change of banking details for the supplier. When you receive a genuine invoice payment is then made to the bogus account. To avoid this situation you must institute a protocol for handling changes in supplier payment details.

Tip. A simple solution is to only amend payment details after they’ve been verified by one of your staff phoning (not e-mailing or writing) a known contact at the supplier.

More difficult to detect

Some frauds are more difficult to detect and combat than others. For example, they might involve a genuine supplier deliberately invoicing for supplies it didn’t make or sending overstated invoices. Your staff, those of your supplier or both, might also be the source of the fraudulent etc. behaviour.

Tip. The Fraud Advisory Panel (an independent body backed by big business) publishes a factsheet on how to spot fraud and measures to counter it. Read and circulate a copy amongst relevant staff, e.g. sales teams, managers and your accounts department.

The next step

Download a fact sheet

Set up a purchase order system and advise your accounts department to only pay invoices where there’s a corresponding purchase reference. Check any request to change a supplier’s bank or other payment details by phoning a known contact at the business concerned