The small business owner’s guide to Companies House

Invoice fraud continues to be one of the most common forms of fraud UK businesses face.

Over £1.2bn was stolen from UK businesses through invoice fraud in 2022 according to data from UK Finance.

Although the number of fraud cases against UK businesses has reduced by 8% since 2021 to three million reported cases, it remains a threat as technology develops and allows scammers to create more authentic-looking fraudulent invoices and communications.

Learn to identify the signs of potential invoice fraud, how to best avoid it, and what you should do if you find yourself the victim of invoice fraud with our guide.

Invoice fraud is a type of scam that aims to convince a business to pay a certain amount of money into a new bank account using a fake invoice.

Scammers typically do this by claiming to be a business you have worked with previously, such as a supplier or tradesperson.

Invoice fraud can also happen when criminals hack a legitimate business’s emails, keeping the email address the same but changing the payment details on the invoices so your money is sent to them instead.

How to protect your business from invoice fraud

Treat payment detail emails with caution

It isn’t uncommon for businesses to need to change their payment details, however, emails informing you about a change should be treated with caution.

Without the proper cyber security, hackers could take control of another business’s emails.

If you receive an email asking you to update your payment details, it may be worth calling a trusted person at the business to confirm whether or not the new payment details are correct.

Be wary of immediate payment pushes

When sending and receiving invoices, payment terms such as the timeframe in which the invoice needs to be paid should be discussed beforehand and stated on the invoice itself.

Invoice fraudsters may contact you and not only ask you to update their payment details but may insist you pay the invoice quickly, pressuring you to do both at the same time.

If you receive an invoice that does not have a payment timeframe or is pressuring you for payment, you may be subject to an active invoice scam.

Reconcile all invoices you receive

Before paying an invoice, it may be worth checking it against your records to ensure that you are expecting the invoice for services or products you have agreed to purchase.

It may also be a good idea to check the sender’s contact and payment details against previous legitimate invoices, as well as the amount requested and what you are being charged for.

Build a comprehensive payment approval process

To decrease your chances of becoming a victim of invoice fraud, you may want to consider implementing a comprehensive invoice payment approval system.

This process may include employees involved with invoices – such as your finance team – and whoever receives invoices directly.

An invoice-checking system may involve steps to confirm that the invoice details are correct, such as reconciling any new invoices against purchase orders and supplier verification.

Verify vendor details before payment

Besides reconciling new invoices against your records and comparing the details to previous legitimate invoices, you may want to verify the supplier’s invoice details before payment is made.

Think carefully before publishing details of your suppliers online

Some firms may publish the details of their suppliers as a way of demonstrating their credentials, or suppliers may list your business as a customer, such as part of a case study.

However, doing this may increase your chance of being the victim of invoice fraud, as it provides would-be fraudsters with helpful information that may help their attempt at invoice fraud be more convincing.

You may want to consider not posting supplier details on your company website, for example, and asking suppliers to not publish your details on their website.

Provide employees with invoice fraud training

Depending on your business, you might not see every invoice that comes in, as you may have employees who handle that task for you.

To reduce the risk of being the victim of invoice fraud, it can be a good idea to ensure that employees have relevant and up-to-date training and know what to look for in order to minimise risks.

What to do if you think you are the victim of invoice fraud

1. Act quickly

As soon as you realise you may have been the victim of invoice fraud, you should consider acting immediately to reduce the risk to your business and reduce the chances of scammers getting away with it.

The longer you wait to act, the harder it may be to recover your stolen money.

2. Contact your bank

If you suspect you may have paid a fraudulent invoice, you should consider contacting your bank as soon as possible.

Doing so could lead them to freeze the transaction, which may enable the payment to be returned to you.

They may also be able to block the fraudulent account so you cannot be scammed into paying the same account again.

3. Report the fraud

Contact the appropriate authorities such as Action Fraud and report the fraud to them to help prevent future scams.

You could consider collecting all the necessary evidence, such as the fraudulent invoice, the scammer’s contact and bank details, as well as your own invoice records to prove the payment was fraudulent.

Can technology help protect from invoice fraud?

To keep track of your finances and invoices, you may want to consider using technology to help reduce your chances of becoming a victim of invoice fraud.

Accounting tools that use AI and automation may be able to detect discrepancies in invoices that may be fraudulent and may be able to flag them to you before immediately authorising payment.