With payment fraud at a record high now, spurring major financial loss for companies all over the world, you know you can’t be too careful.
On guard for fraud
It all starts with good education and training. If your finance staffers know what popular invoice fraud methods are being used today, they’ll be thwarting scams instead of falling for them.
Here are four telltale signs of fraud you’ll want your team to look out for:
1. Split purchases. Most companies have different levels of approval depending on the purchase amount. So, if an employee knows he can make a $200 purchase without additional approval, he may split up a fraudulent $800 purchase into several invoices for $175 or $180 to skate around your controls.
Think someone might be using this scheme? Turn to historical data. Ask staffers to look for a series of invoices that are within, say, 5% of the employee’s authorization limit, advises fraud expert John Verver. That’ll help you ferret out whether there could be any illicit activity.
2. Unusually high costs. You and your staffers know better than anyone else the ballpark of what specific goods and services should cost. And if a purchase that should typically be about $100 comes in at $250, there’s a chance it’s an overbilling scheme. Tell your finance staff to trust their instincts on this front.
To gather evidence, have staffers look into what other, similar vendors are charging for the same products or services. If their instincts were right, they can escalate the issue to you. (And even if it wasn’t fraud, this method may help your department uncover some new savings opportunities.)
3. Little extras. Another form of overbilling occurs when an employee submits an invoice that lists the price, sales tax, and some other “fees” or “add-on charges” that aren’t real.
It’s beneficial to educate your staffers (especially the less experienced ones) on what purchases typically come with additional fees, so they know what to expect and what might be fishy. You could even have your A/P manager put together a short quiz to see whether staffers can identify which fees are legitimate and which are falsified right off the bat.
4. Sequential invoice numbers. Even fraudsters slip up sometimes! If a certain vendor’s invoices seem to come in order (20181, 20182, 20183, etc.), tell your staffers to raise the flag.
Chances are, you’re not the only company a vendor is doing business with, Verver points out. That means, generally speaking, invoices shouldn’t be in sequential order. Staffers can quickly reference back to past invoice history to confirm or deny their suspicions on this one.