Imagine this: You’re running your business as usual, paying invoices, keeping track of expenses, and then—bam!—you realize you’ve just wired thousands of dollars to a scammer. How did that happen? You begin going through your records to see what could possibly go wrong and notice an invoice that doesn’t look suspicious at first sight. But when you take a closer look, you spot a different vendor name. That’s how invoice fraud works, and it’s more common than you think.
According to Medius, invoice fraud costs U.S. businesses on average $300,000 a year. What’s more surprising is that 25% of financial professionals can’t even approximate the financial impact of invoice fraud on their business, likely due to a lack of reporting, limited fraud awareness, and sophisticated scams. But there’s more, of course.
Rodger Desai, CEO of Prove, emphasizes the prevalence of such scams, stating, “Invoice fraud is rampant. It can really hurt small businesses by siphoning their finances with unbelievable fake bills. However, it often goes unnoticed until you realize you’ve been scammed, and it’s all too late.”
Here’s what you should know about this malicious practice.
How Do Scammers Pull It Off?
Scammers use every trick in the book to defraud businesses and individuals of their money. When it comes to invoice fraud, there are a few sophisticated methods they take advantage of.
One of them is fake vendor invoices, where they impersonate legitimate vendors. In this case, when a recipient receives an invoice and doesn’t check from whom it came before making the payment, the money goes to scammers.
Another trick to be aware of is business email compromise. Here, scammers hack a real vendor’s email address and send invoices to their clients (with altered bank details, of course). BEC is much worse than the first method, as it’s much more convincing, as some recipients don’t really go into the process of checking the invoice details.
There are also phony internal requests, where you can get an email from your “boss” or “colleague” who asks you to make an urgent payment. In this case, it’s important to contact them at their email address or meet in person to confirm the request.
How to Recognize Invoice Fraud
Invoice fraud is quite easy to spot, provided you spend enough time checking the information and pay attention to every little detail. Here are some warning signs:
- Unexpected timing
When your vendor, for example, sends you an invoice at the end of the month but you already see it in your email at the beginning of the month, checking every single detail is crucial here. It’s even better to contact the vendor directly to ask if they sent you this invoice.
- Different bank details
If a vendor suddenly changes their bank information, verify this with them directly. If they actually did this, ask them to inform you about any changes made from now on to be sure it’s them who’s sending you the invoice for payment.
- Spelling and grammar mistakes
Although it’s becoming less and less common, as most scammers proofread their texts with AI tools, it’s still important to keep this in mind. If there are too many mistakes, and if you’ve never had a similar situation with a legitimate vendor, you’re most likely dealing with a scammer.
- Urgent payment requests
Scammers are known for asking to make payments urgently. Why? Because they’re scared you can figure everything out if you take time.
Remember, making quick payments is only a good decision when you’re convinced that the person who sent you an invoice is to be trusted. In any other situation, checking the invoice information, no matter how much time it takes, is an effective method not to lose money.
- New Email Address
When you spot that supposedly your vendor sent you an invoice from an email you don’t recognize, it’s time to raise alarm bells. Even if it’s slightly off (e.g., @vendor-payments.com instead of @vendor.com), it’s better to verify than send money to the wrong person.
Summing It All Up
Invoice fraud is a growing issue in the modern financial world. If you’ve never dealt with it, it’s time to get updated on it and protect your finances from individuals with malicious intentions. If you already know what invoice fraud is from personal experience, keeping up with new techniques can help you avoid possible future attacks.
