How To Spot (And Prevent) Invoice Fraud In Your Business
Let’s be honest no one likes thinking about fraud. It’s not a nice thing to think about, let alone go through in business or your personal life. So why are we bringing it up?
Because fraud is a part of our society. Like it or not, we all have to take the possibility of fraud into account when going about our daily lives. Entering our bank details, clicking on unknown emails, even shredding letters – it’s all fuelled by the need to protect ourselves from fraud.
One thing many small businesses suffer from is invoice fraud. You may not have heard of it unless it’s happened to you, since it’s not as widely publicised as personal fraud, but it’s there, and it’s more of a problem than you might think. The main reason is that because small businesses don’t earn as much as larger businesses, when they aren’t properly paid it can affect everything from productivity to orders coming in and even their long-term reputation. A small business doesn’t have the financial security to spent time sorting out invoices that aren’t being paid, and invoice fraud can cause serious issues.
And to make matters worse, small businesses are much more at risk of invoice fraud than larger ones, with 52% of small businesses having experienced it at some point. In particular, law firms, HR companies and IT businesses were most at risk, but invoice fraud covers every industry, so don’t assume you’re safe if you aren’t in that industry! So, what’s it all about, and how do you avoid the unseen threat of the small business world?
Want Is Invoice Fraud?
Invoice fraud is similar in some ways to regular identity theft, but with a bit more of a business twist. With invoice fraud, a criminal poses as you or your business, and sends fake invoices out to your clients. These invoices will look legitimate, since they have often hacked into your business email accounts to gain the information they need (like client information, suppliers you deal with and your invoice appearance), and then use it to create imitation invoices.
Once they have this information, they can easily clone invoices you’ve sent previously, so they look genuine and don’t raise any red flags. They can also use this access to analyse the way you write to your clients, so that your clients don’t even notice anything is amiss when they receive the invoice from you.
Of course, invoice fraud doesn’t only target your clients. The scammers can also use the same techniques to target your business, posing as one of your suppliers. Using this approach, they can get paid twice – once from you and once from your clients, and will continue to do this until you realise something is wrong. Really, once someone has access to your email account it’s amazing what data they can get to!
How Do Businesses Fall For Invoice Fraud?
Well, because if it’s done properly, it’s difficult to spot it! It’s really much easier to become a victim of invoice fraud than you might think. Once the scammer has the email addresses and names that they need, they can simply invoice and request money from one of your clients or from your own business.
Even when the scammer is using their own bank details to get the money they’re asking for, clients would probably not immediately flag the situation as fraud because businesses do change their banking details from time to time. It’s not that unusual for someone to change their banking details, and scammers are always careful to mention in the email that the business banking details have changed, just to make sure the client is aware of it and doesn’t automatically pay into your account instead (at which point you would spot something wrong, since you won’t have a matching invoice). As long as the names matched, no one would think twice about it.
But the main reason is simple: because it’s not something many people are aware of, or do much to prevent.
How To Spot Invoice Fraud
If you are aren’t sure whether you are being targeted, don’t fret! There are several steps you can take to detect a potential invoice scammer.
The first thing you should do is check through all of the invoices you’ve received recently and compare them to previous ones from the same client or supplier (preferably ones you know to be legitimate). A good way to spot a fake invoice is the logo, which may be blurry, pixelated or just not quite right.
Alternatively, there may be spelling mistakes, particularly in the names mentioned on the invoice, or in the fine print. Double-check the email address that sent the invoice too, and if you recognise the client/supplier, then find previous messages from them and compare the email addresses. If they’re different, message the older one and ask if they’ve sent anything to you before you pay anything.
How To Prevent Invoice Fraud
Ok, so that’s how you spot invoice fraud, but what about preventing it? After all, prevention is better than treatment, isn’t it? Yes, it definitely is. So, first things first, make sure you and all of your staff members are trained to double check invoices and be on the lookout for fakes. This doesn’t have to be long or laborious training – a single quick training session can give you all the skills you need to spot invoices that could be fraudulent.
Next, make sure you obey good password etiquette. If you don’t know what that is, then you have some learning to do! The basics are: change all of your passwords regularly, never use the same password for more than one of your accounts, and use secure passwords. Secure passwords should have a mix of lowercase and uppercase letters, as well as special characters (like exclamation marks).
Or, ask a bookkeeper to manage your invoicing for you. As professional bookkeepers, we deal with invoices all day every day, and have been thoroughly trained in how to spot invoice fraud on your behalf. Using a good bookkeeper could put your mind at rest when it comes to invoice fraud, and take a load off your mind for a lot of other things too! If you would like to know more about preventing invoice fraud, or how we can help, just get in touch with the team at Safe Hands Bookkeeping today, or drop in for a coffee, a chat and a piece of cake.