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Fraud: Are you safe?

Tech Finance

Here’s the thing about fraud, until you look at the numbers, you don’t realise just how pervasive it is in business. The Institute of Directors (IoD) surveyed 980 of its members back in December 2015 and found that 72% had received bogus invoices.

Commenting on these findings, civil fraud and asset recovery expert Alan Sheeley of Pinsent Masons, the firm behind, said “the level of bogus invoices being sent to businesses and their potential to cause financial loss was worrying”. Sheeley also pointed out that it’s vital for businesses to have “proper systems and controls in place to prevent such invoices being acted upon”.

There are plenty of schemes out there, the most famous so far being the European Patent Office scam back in 2014. All across the UK, companies were receiving invoices requesting payments for patents supposedly coming from the EPO. They looked like the real deal but of course the bank details for payment were not those of the EPO. Nor had the invoices been sent out by the EPO.

Day in and day out, companies receive invoices for a variety of services and products they may not have ordered. The suppliers could be fake or the total values inflated. Without a transparent purchasing system and full approvals in place, companies are easily misled, and employees taken advantage of. When no trace of where or when an order was placed, there is no way of checking goods weren’t legitimately ordered/delivered in the first place. When you have a head office and several locations — potentially in different countries — the disconnect is so great that the potential for fraud is extremely high.

How bad is it?

In the UK alone, SMEs are losing more than £9bn in invoice fraud every year according to research by Tungsten Network. According to the same study, one in six companies believes invoice fraud has cost them more than £5,000 in the past year. 55% of companies surveyed said cybercrime and fraud is the single biggest threat to their business.
For companies without a secure and transparent invoice and payment process in place, it is extremely difficult to detect suspicious activity in real time. Plenty of businesses we have spoken to find overcharges, bogus invoices and duplicate payments six months to a year down the line. By this point the damage is done. Some even found that APs were still paying for contracts and services that had been cancelled months before by other departments within the business.

An automated invoice management software is one sure way technology can remove the fraud threat by offering full control on spend and a consistent workflow. This has so far been reserved for larger enterprise businesses with a lot of money to spend. But what about small to medium-sized businesses? A landscape of paper-heavy processes and spreadsheets still abounds. In our quest to help companies work safer and smarter, we found that for a lot of businesses, keeping in control of the supplier network is still a time consuming, laborious, complicated and archaic process with no hope of preventing fraud.

 What to do?

Electronic invoicing:

Not just about being greener and reducing paper waste —  electronic invoicing allows finance teams to validate data and credentials against registered details for each supplier. A standard accounts payable team will process thousands of invoices each month and receiving them in paper format is a real issue. The ability to track where paper invoices are within the organisation at any given time is almost impossible and the storage needs for archiving are a great cost to the business. Since the HMRC requires original sales invoices to be kept for seven years, eliminating paper invoices should be the first step taken in the overhaul of existing vulnerable processes. The intensely manual element of processing invoices in paper format or indeed a mix of paper and electronic drains resources and does nothing to mitigate risk.

Electronic purchase orders:

Purchases made by a business are a smorgasbord of phone conversations, email orders or paper based purchase orders. The approval systems in place are anything but efficient with just 50% of all POs communicated electronically to suppliers according to a Hackett Group study. Traceability is yet again a problem and no real control on spend exists such as automatic two way matching of POs to invoices. PO flips and fully functioning approval map are paramount in preventing internal fraud as well as keeping external threats at bay.


Most spend reports produced in business are so far removed from the actual purchase that no real time checks for anomalies ever occur. Without a clear and transparent link between a purchase and its invoice, payments are being made blind, with no real insight into permissions, thresholds/department or budgets. With a technology solution, reports can be run daily and businesses can see everything happening within the organisation in real time. Discrepancies are therefore easily identified and real action can be taken.

How safe are your internal processes and how are you making sure you’re not a victim of fraud?

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