As fraudsters continue to grow smarter with new tricks up their sleeves, businesses remain susceptible to their scams. Companies saw a sharp uptick in payment fraud in recent years, with the global pandemic forcing them to move their operations online. In 2021, payment fraud losses in the US crossed 756 million dollars.
The above chart compares the value of fraud losses through different mediums in the US in 2021.
With that said, invoice fraud detection should be a priority for every business. Reports suggest that invoice scams cost US businesses over USD 300,000 every year. This article sheds light on how to spot fake invoices from scammers and protect your interests.
How do scammers trick businesses with fake invoices?
There has been a huge impact of technology on human relationship, but people have also alot of times took advantage of these technologies and done fraud jobs. As you might imagine, an invoice scam typically involves the scammer sending you a fake invoice. Even for cautious business owners, it can be quite hard to spot fake invoices from scammers. A fake invoice can be used to facilitate a scam in a number of ways.
Fraudsters experienced at pulling off invoice scams play their cards slowly and steadily, seeking out their victims’ vulnerabilities. They’d send you a false invoice at the first opportunity, trying to convince you that you owe them money. Without proper invoice fraud detection measures, it’s easy to fall prey to them.
Apart from getting you to pay them for something you never received, the scammers may even impersonate one of your usual vendors. You’d end up paying them instead of the actual supplier until the latter followed up about non-payments.
9 ways to spot fake invoices from scammers
While it might be tricky and challenging, you can still spot fake invoices from scammers if you know what to look out for. Here are 9 signs that the invoice you received might be fake.
1. Poor wording
Let’s start off with the easiest way to spot fake invoices from scammers. Scam emails are commonly characterized by poor English and grammar, although that might not always be the case. Besides, most scammers don’t put much effort into personalizing the emails for their victims.
They come up with a generic email, without bothering to proofread for errors. Anything unusual wording, grammatical mistakes, and misspelt words might indicate an attempt to scam you.
2. The invoiced sum is unusually large
This is another common mistake that invoice scammers tend to make – especially the inexperienced ones. An invoice for an outrageous sum of money is always fishy, and you shouldn’t make the payment until you verify it.
Scammers who are still new to it get greedy and try to hit a quick jackpot rather than taking it slow and steady. Unless you’re already expecting an unusually expensive invoice, there are high chances that it might not be legitimate.
3. Unaccounted goods and services
This is a type of invoice scam often carried out by vendors themselves. They might create and submit an invoice without actually delivering the products or services they’re supposed to. Also known as third-party vendor fraud, these scams may sometimes involve an insider too. If you suspect to have never received the invoiced goods and services, it’s a good idea to check your inventory before you pay.
4. Persuasion for immediate payment
Rushing the victims to make the payment immediately is a common trick in the book. By pressurizing you into an immediate payment, scammers would try to deny you the time to verify the invoice or check with the actual vendor. It’s not uncommon for fraudsters to threaten legal action unless you pay up right away.
An invoice demanding immediate payment is most likely fake, unless you know you’ve defaulted payments and your vendors might be displeased. It’s best to contact the vendor separately and verify if they really sent you the invoice in question.
5. Unusual requests
Scammers often make unusual requests to make their scams work. For instance, they might request you to change a vendor’s banking and payment information. Also, be wary of fake invoice emails request you to divulge sensitive financial information.
It might be too late for invoice fraud detection if you comply with the requests immediately rather than checking their legitimacy. In such situations, always get in touch with the vendor to confirm. Any unusual request is a valid cause for suspicion.
6. Suspicious links
Did you know that 17% of successful phishing attacks on organizations end in invoice fraud and other similar financial losses? It’s rather common for phishing emails to contain malicious links intended to steal sensitive information or make you send a payment to scammers instead of your supplier.
Source: https://www.statista.com/statistics/1350723/consequences-phishing-attacks/
The above graph presents the consequences of successful phishing attacks on organizations worldwide in 2021.
Any suspicious link in the invoice email is a red flag to watch out for. Remember, most businesses send invoices in the form of PDF attachments rather than sharing a link to view or download the invoice. If a vendor suddenly sends you such a link (one that usually doesn’t), do not visit the URL. Check with the vendor if they’ve decided to change their mode of invoicing and payment.
Most importantly, do not open any suspicious links or download any attachments you don’t trust. All it takes is a single malware to lock down your systems and steal sensitive data.
7. Unfamiliar vendor
This might be a little obvious, but you should think twice before paying off an invoice received from an unfamiliar vendor. Firstly, you’d recognize a vendor you’ve worked with. Secondly, the chances are very low that a legitimate business would send you an invoice without any prior discussion over the timelines, mode of payment, and format. Even if it’s a new vendor you’re working with, you shouldn’t be receiving invoices out of the blue.
8. Different contact information
While unfamiliar vendors are easy to notice, invoice fraud detection is trickier when the scammers pretend to be one of your legitimate vendors. They might even create an email address very similar to that of the real vendor to avoid detection.
If you sense anything is off, especially if the invoice asks you to send the money to a different address than usual, verify the contact information. Check if the contact details on the invoice match those you already have for the vendor in question. If they don’t, it’s likely an attempt to scam you.
9. Invoice billed for something you didn’t order
One would think it’s easy to spot fake invoices from scammers when the invoice bills you for something you didn’t purchase. However, scammers do often get away with it. If they aren’t sure what products exactly you buy, they might make a wild guess and end up billing you for something you never purchased.
These scams typically involve billing the victim for digital products like software and music. These purchases are harder to verify than physical products, which makes invoice fraud detection more difficult. If you receive an invoice for something you don’t think you purchased, contact the vendor to verify.
Steps to take to prevent invoice scam
While we’re on the topic of invoice fraud detection, let us explore how you can protect your business from invoice scams. It’s always a good idea to be proactive about scam prevention and deny scammers any information they shouldn’t get their hands on.
1. Monitor your inventory
First and foremost, you should regularly monitor your inventory levels. This will make it much easier to spot fake invoices from scammers billed against products you didn’t receive. It’s especially helpful in preventing scams by your vendors.
2. Watch out for internal fraud
Are you aware that 31% of major fraud cases involve an internal perpetrator and 26% more have internal and external agents working together? Companies typically focus on external invoice fraud detection, allowing internal perpetrators to get away with their scams. Watch out for erratic employee behavior and verify suspicious invoices without letting potential perpetrators getting the wind of it. 
Derived from PwC’s Global Economic Crime and Fraud Survey 2022, the infographic above shows the share of internal and external actors in major frauds.
3. Trust your instincts
Going by your gut feelings may not always be the best way to make business decisions, but this is an exception. If something about an email/invoice doesn’t seem right, it probably isn’t. If anything, no harm will come of verifying with the vendor if the invoice is legit.
4. Train your employees against invoice fraud
Of course, you alone can’t prevent invoice scams unless it’s a small business and you handle all payments personally. Train your employees to be careful and spot fake invoices from scammers. They should verify any suspicious invoices or report the issue to their higher-ups without delay.
5. Do not share any personal information
Avoid sharing any personally identifiable information with your vendors unless you’re sure it’s really them. Scammers can easily use information such as your contact details or bank account number to initiate phishing attacks.
Endnote
Unfortunately, invoice scams are more common than one might think. As a business owner, you should implement invoice fraud detection measures at every level. Even relatively small scams can build up over time to cause huge losses. Hopefully, you found the read worthwhile and can protect your business from invoice scams effectively.
About the Guest Author:
Fahad Khan is a Product Manager and digital marketing enthusiast who works at Ubuy. Content marketing, PPC, email, and social media marketing are among his areas of expertise. He has been exploring the field of digital marketing to share his pearls of wisdom with the whole world. He enjoys working on different niches and creating valuable content for readers.
