As Australia continues to slip in and out of lockdowns business continuity continues to be tested. While business leaders battle to try and not just survive the pandemic, but thrive, groups of highly sophisticated scammers are seeking to exploit the pandemic
and scam businesses out of their hard earned and much needed cash. According to the ACCC’s latest Targeting Scams Report businesses lost over $128m to business email compromise scams
– that’s nearly $2.5m a week.
According to data from Scamwatch, false billing scams were the most reported scam, accounting for over 75% of total losses. The number of reported scams has jumped by 44% over the last year, as scammers take advantage of both the confusion and disruption
caused by the pandemic. Scammers are also getting better at what they do, with total invoice fraud losses jumping by 180% in the same period.
There are several different invoice fraud types happening in the market right now, here are a few examples:
- Updated Bank Account Details - You receive an email from your supplier asking to update their bank account details due to a change in their internal systems and processes, and you update them accordingly. Unfortunately, the email address of your supplier
has been compromised by a scammer and you’ve just changed the bank account details to those of the scammer. Your suppliers invoice comes in for a legitimate piece of work, which you then process and pay, but the money never gets to your supplier. This same
situation happened to an Australian manufacturing business and it cost the business $17,000.
- Unknown Supplier Invoices - You are sent what looks like a legitimate invoice from a company that you don’t have set up in your ERP, as the invoice looks legitimate, it gets passed around the business to see if belongs to anyone. Someone mistakenly claims
the invoice and processes it for approval and the invoice gets paid. This type of basic invoice fraud was extremely popular a few years ago, but it is still endemic.
- Intercepted and Changed Invoices - Scammers intercept legitimate invoices sent via email and change the payment details to include fraudulent payment information. You receive the invoice and process it as normal, paying the invoice and not realising you
have been scammed. This is now one of the most common ways in which businesses are being scammed and is a very sophisticated and difficult problem to manage.
But we wouldn’t fall for invoices scams…would we?
According to MineralTree, 68% of executives reported that they had received a fake invoice or experienced an attempted form of payments fraud – that’s 2 out of 3 executives. Most businesses have processes in place to ensure they can protect themselves from
invoice fraud, and it is widely accepted that digital invoice processing and accounts payable automation can help to solve many of these issues. But let’s look at the typical process for invoice processing in many businesses, and see where the opportunities
for fraud are:
- You receive a digital invoice usually via email
- The basic data included on the invoice is captured automatically, with varying degrees of accuracy
- Basic data validation checks are carried out to avoid duplication and to ensure the supplier is still active
- The invoice is routed to a reviewer for review and account coding
- The invoice is the routed to an approver for final approval
- The invoice is processed through for payment
Sounds robust and simple right? However, the basic levels of checks in this process are only reducing the risk of duplicate payments and payments to suppliers that don’t exist in your system. So, if you ran an intercepted or/and changed invoice scam through
this same process, where the invoice is intercepted before it gets to you and the bank account details are changed, it wouldn’t get picked up. So, how can businesses really protect themselves against invoice fraud?
Well, businesses looking to truly protect themselves against invoice fraud have a few options:
Add more manual invoice validation checks prior to processing. To try and mitigate the risk of invoice fraud you could add a series of manual invoice validation checks. These checks would depend on your own processes, but we would recommend:
- External supplier validation – manually checking that a supplier is legitimate, through website checks/calling etc.
- Business Number validation – manually checking business numbers are accurate and relate to the supplier on the invoice (e.g., ABN checks).
- Internal supplier details validations – manually checking whether the supplier details on the invoice match your master supplier records.
- Duplicate check – manually checking you have not received this invoice from this supplier before
- Purchase order matching – manually identifying whether the invoice references a purchase order, and whether the supplier and purchase details match what is on the invoice.
- Bank account verification – manually validating that the bank account listed on the invoice matches the one in your supplier records.
These additional checks can all add significant time and cost to your invoice processing workflows and are prone to human error. Fortunately, many of these checks can be automated.
Automate invoice validation checks before the invoices are processed. With most modern AP automation and procure to pay automation tools, data verification of invoice data can completely automated and mitigate the risk of invoice fraud. The checks
highlighted above can be automated and enhanced through adopting the right technology:
- External supplier validation – making automated checks against popular risk and fraud databases to ensure your suppliers are legitimate
- Business Number validation – making automated checks against Government business records to ensure the business is who they say they are
- Internal supplier details validations – automatically checking whether the supplier details on the invoice match your master supplier records
- Duplicate check – automatically making sure you have not received this invoice or an invoice very similar from this supplier before
- Purchase order matching – automatically identifying whether the invoice references a purchase order, and whether the supplier and purchase details match what is on the invoice and automatically importing the PO approval if it matches
- Bank account verification – automatically validating that the bank account listed on the invoice matches the one in your supplier records
- Each of the above methods are effective ways to mitigate invoice fraud. However, a third option is gaining a lot of traction across the region.
Move invoicing into the secure Peppol e-invoicing network. Electronic invoicing (or e-invoicing) is the automated digital exchange of invoice information directly between a buyer’s and supplier’s systems, removing the need for any manual data entry
or validation. The ATO estimate that it can reduce the cost of processing an invoice down to $9.18.
Australia, New Zealand and Singapore have all adopted a globally
recognised standard for sending e-invoices and e-orders known Peppol (Pan-European Public Procurement OnLine). This standard enables anyone who is part of the network to easily and safely, send e-invoices and e-orders to each other. The standard also enables
a simple and accessible way for businesses to be onboarded onto the network. There are already 200,000+ businesses across 34+ countries on the Peppol network, and several mandates are
expected to encourage more Australian federal and state government agencies and businesses to switch to Peppol e-invoicing.
We will look at Australia’s Peppol network in more detail in our next piece.