Today, businesses large and small are grappling with a rise in invoice fraud. As a result of invoice fraud alone, global exposure amounted to $12 billion in the first three months of 2020. Between April and May, Business E-mail Compromise (BEC) attacks increased by 200% a week.
This dramatic increase in fraud is costly and time-consuming to rectify and has many businesses scrambling to find a solution. Fortunately, there are steps that all businesses can take to help protect themselves from this growing problem.
Dark web monitoring is getting more sophisticated because of the rise in fraud. By monitoring the dark web, businesses can detect fraudulent activity early and take steps to prevent it.
How Does Invoice Fraud Work?
There are several ways that criminals can commit invoice fraud. One standard method is called “baiting.” In this type of fraud, the criminal will send a fake invoice to a business for goods or services that the business does not need.
The invoice will look legitimate, but the goods or services will never be delivered to the company. This type of fraud can be difficult to spot because the invoice looks like a legitimate bill for goods or services that the business may have ordered in the past.
Another standard method of invoice fraud is called “phishing.” In this type of fraud, fraudsters trap consumers or businesses by sending them an email that looks like it’s from a legitimate company. The email will contain a link to a fake website where the victim is asked to enter personal or financial information.
What Can Businesses Do To Avoid Invoice Fraud?
There are several steps that businesses can take to protect themselves from invoice fraud.
Acknowledgment of Suppliers
The first step is to ensure that all suppliers are legitimate. This can be done by verifying the supplier’s contact information and seeing if they are registered with the Better Business Bureau.
Additionally, businesses should only work with suppliers that have a good reputation. They can check online reviews or ask other businesses in their industry for recommendations. Moreover, businesses can ask for references from the supplier and contact those references to verify the quality of the supplier’s work.
Utilise a Disciplined Invoicing and Cybersecurity System
This means that businesses should create and maintain a database of all their suppliers.
The supplier’s contact information, the type of goods or services provided, and the price paid should be included in the database. With this information, supplier invoices can be verified to be accurate. In addition to having a disciplined invoicing system, businesses should also have a cybersecurity system in place. This system should include firewalls, anti-virus software, intrusion detection systems and dark web scanning tools.
These systems can help to protect businesses from phishing attacks and other types of cybercrime. This information can be used to reconcile accounts and catch any fraudulent activity.
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Streamline Your AP and AR Processes
AP and AR processes of any business should be streamlined. This will help to ensure that all invoices are legitimate and that payments are made on time. AP and AR processes of any business display all the invoices in chronological order. This will help businesses to keep track of all the invoices and payments made.
Businesses can also use invoice financing to help streamline their AP and AR processes. Invoice financing is when businesses sell their unpaid invoices to a third party at a discount. This allows businesses to get cash upfront for their invoices and frees up working capital.
4. No PO, No Payment
Another way to protect businesses from invoice fraud is to have a “no PO, no payment” policy. This means that businesses should only pay for goods or services that have been purchased through a purchase order.
A purchase order is an agreement between a business and a supplier to purchase goods or services. The purchase order should include the price, quantity, and quality of the purchased goods or services. This policy can help prevent businesses from paying for goods or services that were never delivered.
Make Use of Three-Way Matching
Three-way matching is when businesses match the purchase order, the invoice, and the goods or services received before making a payment. This can help to ensure that all three documents are legitimate and that the goods or services were delivered.
Three-way matching includes:
- Matching the purchase order to the invoice to ensure that the goods or services billed match those ordered.
- Matching the invoice to the goods or services received ensures that what was billed was delivered.
- Matching the payment to the invoice to ensure that businesses are only paying for legitimate invoices
As we move forward into 2022, businesses need to be proactive in their approach to invoice fraud. This means being aware of the different methods scammers use to try and steal from your company, having protocols in place to prevent these scams, and knowing what to do if you are a victim of fraud.
At the very least, make sure you check all invoices thoroughly before paying them, and keep an eye on your accounting records so that any discrepancies can be caught quickly. With vigilance and some basic security measures in place, your business can protect itself against one of the fastest-growing types of online fraud.