How E-Invoicing Helps You To Detect Billing Fraud

Data breaches, email fraud, and other cyberattacks have become major concerns for businesses in the last few years.  Now, there’s another type of fraud that you need to be aware of and protect yourself from. 

Billing fraud, often also referred to as invoice fraud, is an increasingly pervasive and complex phenomenon in business today. Whether you are self-employed, a small start-up, or a Fortune 500 corporate giant, everyone is vulnerable to this type of crime. 

According to one survey, invoice and payment fraud grew by over 75% in the first three months of 2020. In 2018, reveals the FBI, the global exposed monetary loss solely from B2B invoice fraud exceeded $12 billion. That this is a knock that many companies simply cannot take is evidenced in the Bottomline 2020 Business Payments Barometer Report. The report reveals that only one in 10 small businesses are able to recoup more than 50% of losses to fraud.

Fortunately, there is a solution that ensures you can protect your bottom line. 

E-invoicing is arguably the most effective strategy currently available to combat billing fraud. An e-invoice (electronic invoice) is a fixed-format account statement that is electronically generated and delivered. Since they contain invoice data in a standardized format, e-invoices can be automatically loaded into the purchasing organization's payment-processing system.

In this post, we explain just how e-invoicing assists you in detecting and preventing billing fraud. But first…

What is Billing Fraud?

In a nutshell, billing fraud occurs when criminals, posing as your suppliers, send false invoices to your accounts department in an effort to defraud you. Since it often requires insider knowledge of your payment processing system, billing fraud frequently comes from inside your organization. However, vendors or third parties may be the perpetrators too. As you might imagine, billing fraud can result in serious financial losses for your business.

Let’s look at the various ways in which scammers commit invoice fraud, as well as how e-invoicing can help prevent each of them.

Under-Threshold Invoices

Most businesses have a minimum payment amount below which they will pay an invoice without flagging any queries. This often applies even if the accounts department is unfamiliar with the supplier in question. The rationale for this is that following up on a low-value invoice is more expensive than just settling it.

As such, sending below-threshold invoices is a common tactic of billing fraudsters. If this is done repeatedly, with undetectable regularity, the net losses can really start to add up.

How E-Invoicing Solves the Problem

Effective e-invoicing software provides suppliers with access to feature-rich supplier portals when they submit invoices. Consequently, vendors can verify the status of their invoices and payments. 

If a supplier gets invited to register on your e-invoice network, then you know that both the supplier and the invoice are authentic, even if the invoice is for a negligible amount. 

Apparent Changes to Payment Details

Unfortunately, this type of billing fraud is becoming increasingly commonplace. It entails the fraudster, posing as a supplier, notifying an organization’s accounts department that the supplier’s payment details have changed. Seasoned criminals make such notifications seem legitimate by using suppliers’ actual letterheads and email domains that are very similar to those used by the supplier.

As a result, payments get made into fraudulent accounts instead of those of the supplier. This often goes undetected until the supplier follows up on unpaid accounts, at which point it may be too late to recover the lost funds.

How E-Invoicing Prevents Fraudulent Changes

Self-service is an extremely useful feature that’s made available by supplier portals—yet another reason why they are so beneficial. The customer's vendor master file will be automatically updated if a supplier makes changes to their contact information or addresses. Simply requiring that all banking information gets kept up to date through the portal is one foolproof method for preventing corporate crooks from getting in touch with you in an effort to reroute the flow of money from the bank accounts of genuine suppliers.

In addition, businesses that utilize e-invoicing networks to receive invoices can establish rules within the system. These rules can ensure, for example, that each invoice file that gets sent to them via the network contains the banking information of the supplier. An alert will get sent to both the customer and the supplier if the banking information on the vendor master file does not match this information. This would prevent payments from getting made to any fraudulent bank accounts.

Fraudulent Duplicate Invoices

Duplicate invoices are not necessarily submitted with nefarious intent. Usually, due to human error, a supplier may accidentally submit two separate invoices with the same invoice number. For small businesses or start-ups, this likelihood can be reduced with the use of a self-employed invoice template, as this helps to track consecutive invoices and invoice numbers. But errors can still creep in, regardless.

However, unscrupulous operators often send out two such invoices on purpose to solicit double payments. 

How E-Invoicing Eradicates Duplicates

By implementing automatic controls at critical stages of the e-invoicing process, businesses can eliminate duplicate payments almost entirely. Repeated invoice numbers from the same vendor are among the numerous irregularities that e-invoicing software can detect with far greater efficiency than that afforded by manual detection methods.

When the software discovers a repeated invoice number, the system rejects the invoice, and the data gets returned to the supplier. Fraudulent duplicate invoices are thus intercepted before they can even get uploaded onto your company’s payment portal. This technology saves time and money and eliminates the chance of fraudulent payments. 

The Bottom Line

It’s an unfortunate fact that companies the world over lose billions of dollars to payment fraud each year. Indeed, global losses from payment fraud tripled between 2011 (US$9.84 billion) and 2020 (US$32.39). This trend is expected to continue, with a projected global cost of US$40.62 billion in 2027, up 25% from 2020.

As your business scales up and your number of vendors and monthly invoices increases, so too does your vulnerability to e-billing fraud. As such, you simply can’t be too careful when it comes to guarding against such threats.

E-invoicing systems provide a highly effective means to combat billing fraud by removing the factor of human error. With a little research, you can secure safe and effective e-invoicing services from reputable providers. What’s more, there are many e-invoicing services now available at highly affordable rates. This means that you don’t have to wait until your business grows to begin utilizing this invaluable technology.

A sophisticated billing software can be used to reduce fraud in e-billing. You can check on google for a variety of top billing softwares online.