Small Business Advice

One in thirty UK businesses duped by fake invoices

29 Feb 2016

Invoice fraud

Invoice fraud and duplicate invoices are very real concerns for small businesses in the UK, with recent research from Concur, part of SAP, revealing that one in thirty British businesses have inadvertently paid fake invoices, while 34% of UK businesses have mistakenly paid duplicate invoices.

If you need help or advice setting up systems to minimise financial and business risks, we can help. Please get in contact.

Financial systems and reports to spot and stop fraud

It's difficult to run a growing business and keep track of everything, both internal and external. That's why if you have good processes and good external advice you can minimise and/or spot the risks and signs of fraud. Talk to us about how we can help your business minimise the risks of invoice fraud, fraud generally or errors costing your business money.

The report also suggests that beyond those businesses that know they have paid fraudulent invoices, many more may have been duped into paying without ever becoming aware of the deception.

Recovering overpaid or wrongly paid money is often difficult

It is often impossible for small businesses to recover any money they have paid towards fraudulent invoices. Duplicate invoices can obviously be disputed, and any duplicate payments can be recovered from suppliers, but this will likely only happen if the small business discovers the mistake, and can still tie up a portion of the company’s working capital until the money is repaid.

Small Business Owner

So how can small businesses recognise fake invoices? And how can they ensure they don’t pay multiple times if and when they receive duplicate invoices?

Purchase orders reduce risk

Purchase Orders (or POs) are widely used commercial documents that constitute formal (and, if accepted by the seller, usually legally binding) requests to purchase goods, services or raw materials from suppliers, vendors or service providers.

Many small business owners don’t raise purchase orders when procuring goods or services – they have enough paperwork and administration to deal with, do they really need to add purchase orders to the mix?

Given the financial risk posed by invoice fraud, and the risk of tying up precious working capital with duplicate invoice payments, the answer is an unequivocal ‘yes’.

Get it in writing

Get It In Writing

While purchase orders may seem like overkill for sole traders and small businesses, they do amount to more than another piece of bureaucratic paperwork. Since they lay out all the details of a specific order, and form a legally binding agreement when accepted, purchase orders can play an important role in helping to prevent misunderstandings, delays and disputes when small businesses are dealing with suppliers.

Just as important, though: when a small business maintains a strict policy of only paying invoices that reference an open purchase order that they themselves raised, POs can help protect the business against invoice fraud and avoid duplicate invoices.

Be specific

It is important to ensure purchase orders are correctly (and consistently) structured and that they include any and all information necessary to inform how and when the order is processed, including specific details about the product or service being provided, the timescale for delivery, the agreed costs, the payment schedule and how the client and supplier will handle delays or disputes.

If you are unsure how you should structure your purchase orders you can download our free Purchase Order Template.

Insist that invoices reference purchase orders

Every purchase order should be assigned a unique Purchase Order Number, which will be referenced when the supplier issues an invoice to request payment.

By insisting that suppliers and service providers reference corresponding purchase orders in every invoice they issue, small business owners can ensure they don’t receive (and pay) an invoice more than once, and can also avoid joining the one in thirty UK businesses that have been duped by fake invoices.

Keir Wright-Whyte

photo

Managing Director

0207 043 4000

About the author

Originally graduating with a degree in geography from Edinburgh University, Keir claims that he was then tricked into becoming an accountant by one of the UK's top 5 accountancy practices.The deception extended to the usual training in audit and associated activities.

Keir subsequently worked in a number of advisory roles with clients including in the energy trading, pharmaceuticals and financial services sectors.

He loves working at Accounts & Legal because of the variety of work and clients, the excellent team ethos and morale, the importance placed on genuinely helping and being useful for clients and because he believes what he does matters to clients and helps the firm.

Keir's primary role is to ensure that new clients with complex businesses or needs are on-boarded in the best way and he is a "trouble shooter" both for clients and where complex issues arise internally. He also helps the accounting teams strive to improve what we do for clients, whether processes or services.

When not debiting or crediting, Keir has a penchant for fixing old buildings, skiing, surfing and cycling.

  

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