Question

There are four ways that fraudulent invoices are approved for payment what are they?

Answer 1

Invoice fraud is when fake invoices are sent to targeted businesses in an attempt to extract money from companies with vulnerabilities in their accounts payable processes.

Fraudsters target a company based on their size and location to narrow down what suppliers they may use regularly, such as office supplies, cleaning services, etc.

With this information, they then create phony invoices on behalf of these suppliers that look legitimate except for small discrepancies such as different addresses.

Armed with the knowledge that most Accounts Payable departments are always playing catchup, they send these false invoices with a sense of urgency such as ‘This Invoice is 90 days past due’.

To top it off, invoice fraudsters are refining their craft by making the dollar amount of the invoice low enough that it won’t trigger suspicion. For example, if $1000 is within the first approval level, it will get approved easier and thereby bypassing your accounting controls such as three way matching.

Without a thorough investigation, these fake invoices can easily get paid out. Businesses with multiple departments and poor communication can easily be susceptible to substantial amounts of invoice fraud.

Some other types of invoice scams to look out for include duplicate invoices and inflated invoices. Some fraudsters or dishonest companies may send multiple invoices that claim to charge you for a service you already paid for, or perhaps they will raise the price on the invoice higher than what was agreed to.