Succumbing to fraud strikes fear in most people yet for many UK businesses it’s not as high a concern as we might expect. Research we conducted recently into the supplier invoicing practices of 500 companies shows they remain widely exposed to the risks accompanying fraudulent invoices, with three percent said they had paid fake ones in the past and 21 percent said they had received them without paying. Only one in five cited fraud as a worry, however, with invoice duplication a bigger concern —little wonder given a third make duplicate payments.
Given the obvious perils of being duped or defrauded, how do companies let the wrong invoices slip through? Gaps in invoice functions and a lack of adequate detection capabilities are the main culprits but getting a handle on tackling these issues is well within the means of the business back end.
Facing up to fraud
If only three percent of companies know they have paid a fraudulent invoice it begs the question: how many more have no idea and have paid or are still paying them? It’s a potential black hole —invoice fraud may be low on the priority list but businesses must understand how dishonest activity could hit them. For one thing, there is little to no way to recoup the money if a fake invoice is paid; worse still, HMRC can penalise businesses that claim VAT on false payments or investigate their process risk levels.
Low levels of concern hint at an attitude of ‘it won’t happen to us’, but invoicing remains a largely manual process that people won’t always get right. Fraudulent activity can escalate to more serious matters if it is not picked up by financial controllers, just like phishing where the attackers repeatedly exploit identified vulnerabilities.
Duped by duplication
Despite the fraud risks, our research revealed that duplicate invoices more deeply concern a larger number of businesses —34 percent cited it as a real worry. One in three of 500 are aware of paying duplicate invoices; rising to 59 percent for businesses with 1,000 and 2,999 employees. Paying the same invoices multiple times is both a waste of money and wasted opportunity to invest in vital business growth.
How has duplication become a prevalent dilemma? Interviewees admitted that invoices do not always come into the same place in the business, with almost two-thirds of firms with 1,000 to 2,999 employees, and six in ten employing 3,000 or more, acknowledging that this makes enforce centralised approvals difficult. It’s a growing problem that growing companies must recognise.
There are opportunities to learn from these findings that will help companies to counter the real and potentially costly ramifications of invoice fraud and duplication. Key is creating more transparent processes so dots are connected across the invoice function and early warning systems can raise flags if vendors aren’t recognised or information is duplicated.
Awareness and willing come first but taking charge of this back end process will combat fraud, save costs and avoid a run-in with the tax man.