Protect Yourself from Invoice Fraud – Part One

Anyone familiar with Jeffrey Archer’s short story, ‘Crime Pays’ from his 2000 book ‘To Cut a Long Story Short’ will know how easily and ingeniously the protagonist (antagonist?) Kenny Merchant perpetuates invoice fraud against some of the leading businesses in his country. Kenny’s fictitious and thoroughly enjoyable account (you’d be rooting for him, I promise) teaches us an important lesson about invoice fraud.

Invoice fraud is a serious issue that can run into millions and billions of dollars annually. It is perpetuated by fraudsters and scam artists who constantly seek newer and more innovative ways to swindle organizations and even nations out of money, hampering growth and development in the process. In this post, we’ll see some ways this fraud is perpetuated and how online invoicing software can help you protect yourself from it.

Invoices for services never rendered: This is one of the most common forms of invoice fraud. In this scenario, organizations are sent invoices for products they never bought or services they never sought. One of the biggest reasons this trick can still work is that, oftentimes, in large enterprises, the person in-charge (facilities or admin) of ordering something, say office supplies, is different from the person who pays for it (accounting). If the accounting executive is too busy to check with the admin executive or simply ignored doing so, the invoice is processed and the amount paid. To make the invoice look legitimate, the fraudster might even go to the extent of figuring out the company’s approval process and the major decision makers involved and accordingly preparing the invoice (after all, it’s hard for you to ignore an invoice that seems to have your boss’ approval).

Overcharging: Charging well and beyond the accepted amount is another technique used to dupe organizations. Taking the same example again, say the admin executive ordered for office supplies of a certain quantity and placed the order. He does not know how much it costs nor does he care, thinking that the accounting executive will worry about the finances. The vendor might fudge the numbers to charge more than the accepted amount. As the admin executive never communicated with the accounting executive, this goes unnoticed. The accounting executive, not knowing about the extra charge, pays out the money.

Please click here to go to Part Two.