As insidious as it is, there are ways to take the initiative against invoice fraud and make it almost impossible for imposters to infiltrate your process. To do that, though, you need to really, really be on your game.
Unfortunately, many organizations take pains to prevent invoice fraud and still suffer significant losses, underscoring how vigilant you must be. Today’s level of sophistication in invoice fraud explains why a British engineering firm was swindled out of $25 million by a deepfake call from the Chief Financial Officer and a clever fake invoice. It’s why a pair of the largest companies in the world lost $122 million to invoice fraud. And it’s why Medius estimates the average business hit by invoice fraud loses $133,000 per incident.
The problem—and I recognize this is not a heartening statement—is that fake invoices are so good. Even very experienced fraud officers at major corporations and seasoned accounts payable clerks who sort through thousands of invoices a year can be fooled. Bad actors can research your company’s supplier base and use artificial intelligence to help them craft believable fake invoices. These closely resemble legitimate documents except for a few critical details that, if approved, will send your payment careening to the wrong account.
How can you avoid being on the wrong end of a shady invoice? As promised, here are five methods to ensure you lock out all but the most sophisticated fraudsters and keep your business safe, all of which involve using technology, better processes, and common sense.
5 Smart Ways to Prevent Invoice Fraud
Implement an Invoice Submission Portal
Relying on mailed or emailed invoices limits your visibility into vendor details, making it easier to overlook red flags like address or domain changes, especially if they’re subtle. A secure portal ensures vendors provide key information within a centralized database. Any changes to a vendor’s domain or address can be flagged by the system of vigilant staff for review before a payment is processed.
Ensure Purchase Order & Invoice Matching
Fraud isn’t always obvious, even when vendor details remain consistent. Matching invoices to purchase orders—particularly verifying dollar amounts—helps prevent fraudulent activity. Ideally, automated line-item matching should be incorporated to catch sophisticated fraud attempts; machine learning and AI are making this much faster and easier than it used to be.
Automate Discrepancy Detection
Your system should flag inconsistencies between purchase orders and invoices, especially when amounts fall outside a predefined tolerance range. Anomaly detection is becoming more sophisticated, meaning you can better trust automation to do the job that once would have involved much more hands-on scrutiny. Establish different thresholds for small and large vendors to weigh discrepancies appropriately. Flagged invoices can then be carefully reviewed by an approver.
Lean on Robust Reporting for Risk Detection
While automation helps, human oversight is still critical. Advanced reporting and analytics can highlight suspicious vendor behavior before it leads to significant financial losses. If possible, integrate vendor risk assessments based on their transaction history with your company and other payers within any payment network.
Enhance Security with Multi-Factor Authentication (MFA)
Requiring MFA for vendor logins and invoice submissions adds an essential layer of protection. This step prevents unauthorized access and significantly reduces the risk of account takeovers and fraudulent submissions.
In addition to these measures, it’s always wise to train your staff to look for telltale signs of invoice fraud. No system is entirely foolproof, and you rely on your team because you trust their judgement and ability. Any address change, typo, or out-of-the-ordinary payment amount should raise a flag for your team, as they have a deeper understanding of your customers than AI does. Consider AP staff, at worst, a last line of defense.
Investing in an invoice automation solution that connects to a secure payments network adds yet another layer of protection, ensuring that fraudulent payments never leave your system, even if your most robust invoice fraud prevention fails. Remember, fraudsters have nothing but time and incentive to defeat your best efforts to defend your business, so staying ahead means using the best technology, the most refined processes, and constant vigilance.