Invoices are prime targets for fraudsters, who skillfully blend their scams into the daily rush of accounts payable. They often strike mid-week, when your accounts payable team is busiest processing payments and meeting deadlines. Fraudsters mimic logos, emails, and companies step by step as if they were encrypted. Unfortunately, the trend shows no signs of slowing down. Recent data highlights a growing threat, with fraudulent document attempts rising 50% year-over-year from 2023 to 2024.
The good news? Fake invoice scams can be spotted early. If you still haven’t opted for purchasing software that checks for invoice duplicates, automates matching with purchase orders, and provides real-time alerts for suspicious transactions—our guide will help you identify and prevent early signs of fraud first! Read on to stay informed and safeguard your business before it becomes another victim.
What Is an Invoice Scam?
It is a sneaky scheme in which scammers send fake invoices that look 100% real, complete with authentic logos and vendor names. The goal is to trick businesses into paying for goods or services that were never delivered or ordered. Companies with a ton of invoices are the perfect targets because their accounts payable teams often overlook the details, thinking invoice scams —are all business as usual.
Common Types of Invoice Frauds
As you can see, invoice fraud is a silent thief that can drain your business’s resources without you even noticing. Yet, knowledge is power. Arm yourself with these common types of invoice fraud to spot signs early on and fortify your business.
Fake Vendor Invoices
Scammers create invoices from nonexistent vendors, often mimicking real companies. For example, a fraudster might invent “ABC Supplies” with a logo similar to “ABC Solutions” and bill for unordered office supplies.
Overbilled Invoices
Fraudsters inflate charges for legitimate services. For example, a vendor might deliver 50 units but invoice for 75, pocketing the difference.
Duplicate Invoices
Scammers resend paid invoices with slight changes, tricking businesses into double payments. Thus, after paying for IT services, a second invoice might arrive with a new reference number.
Business Email Compromise (BEC)
Hackers spoof or hack vendor emails to send fraudulent invoices. They might request urgent payment to a new account, which they control.
Phishing Invoices
These invoices hide malware in attachments or links. Opening them can compromise your network and data.
How Fraudsters Generate Fake Invoices
An invoice fraud scheme often unfolds like a carefully scripted play. It all starts with a bit of detective work. They dive first into the ins and outs of the company: its websites, social media profiles, and any public records they can find. The goal is to piece together a picture of your business—who your vendors are, what services they provide, and even the little details like how their invoices are formatted. Armed with this knowledge, they’re ready to move forward.
From there, they often turn to trickery to dig deeper. Imagine an email landing in your inbox that looks like it’s from your trusted vendor or even your own boss. It might ask for sensitive details—like bank account numbers or invoice approval processes—or direct you to a website that seems legitimate but isn’t. A phishing game is their next step, a sly way to extract the information that makes their scam airtight.
After that, with enough data and Adobe Photoshop in hand, they set out to craft a “perfectly legit” fake invoice. They’ll slap on your vendor’s logo, mimic their layout, and even throw in an invoice number that fits right into your records. It’s digital forgery at its finest.
Timing plays a big role in their scheme. They don’t just send the invoice whenever—they wait for the perfect moment. Maybe it’s the chaotic end of the month when your accounting team is buried in work, or perhaps a holiday stretch when half the office is out. They might spice up the email with a dash of urgency: “Pay immediately to avoid penalties!” The idea is to catch you off guard, hoping the invoice slips through without a second glance.
The final piece of the puzzle is getting paid. They’ve set up a bank account, often under a fake identity, or enlisted someone—sometimes an unwitting “money mule”—to collect the funds. Once your payment hits, it’s whisked away, and by the time you realize something’s off, they’re long gone.
Finally, that’s their playbook: research, deception, creation, timing, and a quick getaway with your money. It’s a smooth, calculated process, but knowing how they operate is the first step to stopping them.
Ways to Protect Your Business from Invoice Scams
Businesses of all sizes can fall victim to invoice scams. Yet, with robust strategies in hand, you know how to protect your business.
Verify Invoices Against Purchase Orders (POs).
A purchase order is a document you issue to a supplier detailing what you’ve agreed to buy, the quantities, and the price. Make it a strict policy: no invoice gets paid unless it matches a corresponding PO. This tactic ensures you only pay for authorized purchases, cutting off a major avenue for scammers.
Establish a Dual-Approval Process.
Require two people to sign off on payments—one to review the invoice and PO match, and another to approve the transaction. This extra layer reduces the chance of fraudulent payments slipping through.
Maintain a Tight Vendor List.
Keep an up-to-date database of approved vendors and regularly audit it to remove outdated or suspicious entries. Scammers often exploit lax vendor management to sneak in fake invoices.
Train Your Team.
Educate employees to spot warning signs: urgent payment demands, unexpected changes in bank details, or invoices from unknown sources. A quick verification call can stop fraud in its tracks.
Monitor Accounts Closely.
Set up alerts for unusual transactions. Catching suspicious activity early can prevent significant losses.
Tools and Technologies That Prevent Invoice Fraud
Equip yourself with technology to fortify your defenses. Here are some leading options:
- Automated Invoice Processing Systems
Tools like Precoro automatically match invoices to POs, flagging discrepancies such as incorrect amounts, duplicate invoices, or unrecognized vendors. Thus, businesses can reduce manual errors and speed up verification.
- Blockchain Technology
Emerging blockchain solutions create tamper-proof records of invoices and transactions. While not yet widespread, they offer a promising way to ensure authenticity and traceability.
- AI and Machine Learning
These systems analyze invoice patterns to detect anomalies—say, a sudden spike in charges or a new supplier popping up. Platforms like Bill.com integrate AI to enhance invoice fraud detection.
- Positive Pay
A banking service where you send your bank a list of approved payments. They only process what’s on the list, blocking unauthorized transactions. - Data Encryption
Encrypt sensitive invoice details to prevent interception. If scammers can’t read your data, they can’t replicate it.
Conclusion
The truth is harsh: the longer invoices are processed without oversight, the higher the likelihood of fraud. Since financial departments still largely rely on manual invoice management, they will continue to face an ongoing battle against invoice fraud.
It’s not just smaller businesses that get hit—big companies like Amazon have been victims, too. But with this guide, you’ll get a better handle on common scams, learn to spot warning signs, and take steps to safeguard your organization when dealing with invoices.
Citiesabc was created by a team of global industry leaders, academics and experts to create new solutions, resources, rankings and connections for the world’s top cities and populations.
