Invoice Fraud: How Small Businesses Protect Themselves (and Their Customers)

Invoice fraud is highly frustrating to deal with. Put simply, it typically sees criminals pretending to be legitimate service or product suppliers to get access to payment details and arrangements, then using that access to get genuine payments directed to their accounts to be siphoned away. Because invoices are so vital across industries, it’s a serious threat for businesses of any size — but it’s particularly concerning for small businesses that lack the resources to deal with the extended legal wranglings that can stem from that type of fraudulent activity. What can they do? Fortunately, there are some fairly basic steps that small businesses take to protect themselves and their customers from invoice fraud. Here’s how they manage it: They warn their customers to be mindful Since the main threat is to the people making the payments, small businesses take the time to communicate extensively with their customers, ensuring that they know what is and isn’t normal for their invoicing. Ideally, they can give out security pamphlets with useful information and steps to take if any fraud is suspected. They should also provide clear pricing (for instance, listing pet treatment costs on their websites). This is also good for building brand reputation: showing that they really care. They appoint chief financial officers (CFOs) The main value of a CFO is in keeping a company’s general finances in order, but a significant part of that can be dealing with incoming invoices. If ten invoices show up during a week, that will likely be too much work for a CEO to adequately vet — that’s where the CFO can step in to confirm legitimacy and ensure payment. Here are some tips for choosing one. They carefully protect their records Invoice fraud is most likely to be successful when the criminals responsible know a lot about a real payment arrangement, and the simplest way for them to get that information is to retrieve it from the files of the intended recipient. To protect its customers from being targeted, then, a small business can keep its internal security high — without knowing what legitimate invoices are pending, criminals will find it much harder to fool their intended victims. They use consistent invoice designs Even when the criminals have access to legitimate invoices for comparison, they’re still likely to make mistakes when creating fraudulent invoices (e.g. using the wrong layout, leaving out vital images, spelling things incorrectly, listing different payment methods, etc.). To make this inconsistency stand out, small businesses strive for absolute consistency in their designs: thankfully, using something free and simple like Wave’s invoice generator makes this easy while helping to maintain a paperless operation (paper copies are points of insecurity). They send invoice notifications In anticipation of sending an invoice, a secure business will send some type of advance notification to the customer. It could be a text message, an email, a letter in the mail, or even a phone call — it depends on the customer’s preference. That way, if the customer receives an invoice that they weren’t explicitly told to expect, they’ll have reason to doubt it, and be inclined to chase the matter up with the business to confirm legitimacy. They confirm payments upon receipt Because payments can take time to go through (depending on the payment systems used, and on the operating hours of the banks involved), it isn’t generally possible to confirm receipt immediately after an invoice is fulfilled, but a good business will send confirmation as soon as it’s available. If a customer sends a payment for an unexpected invoice and gets no such confirmation within a working week, they’ll know to contact their bank and seek action. Small companies can’t afford to lose the business (or trust) of their customers, so they have to remain extremely vigilant, guarding against not only invoice fraud but all kinds of financial fraud that criminals might attempt. If you run a small business, take note of the tactics we’ve looked at, and adopt them as a matter of priority — it’s worth it to protect both your customers and your all-important reputation.