Combatting The Two-Sided Headache Of Invoice Fraud

Even with the digitization of the invoice, fraud remains a rampant problem, and it’s not only the buy-side of the B2B equation faced with the consequences. Whether through malicious intent by legitimate vendors, the altering of real invoices by cyber attackers, or the generation of entirely fake invoices by digital thieves, the opportunities for bad actors to steal company cash remain vast.

The reliance on paper or PDF invoices makes it easy to alter data on the bill to reroute payments into the incorrect bank account, but attackers are getting more sophisticated in their tactics, too. Deepfake technology means criminals can masquerade their own voices to convince unwitting employees to approve an invoice for payment, for instance.

Whether their methods are sophisticated or not, these tactics often rely on the fact that, for many organizations, there simply are not enough resources to examine every single invoice and validate it to combat the risk of fraud.

Worse, says OpenEnvoy Co-Founder and CEO Matt Tillman, many businesses aren’t even aware of just how big this threat to their company coffers is.

“I don’t believe they understand the real cost to the business,” he recently told PYMNTS. “How much profit is being left of the table and the human resource expense to identify, track and correct inaccuracies. I’d be willing to be that any controller or CFO that doesn’t have an automated auditing process is worried about it.”

A Straightforward Challenge

This is the pain point that led OpenEnvoy to form in the first place. The company announced its formal launch last month as a technology provider designed to automate the invoice auditing process to combat fraud and errors for accounts payable personnel.

The process of validating invoices for payment is not a particularly complex one, but it is a challenge that grows more difficult as the number of purchase orders submitted and the volume of invoices received grows.

“It’s time-consuming and expensive” to match every item on a purchase order to an invoice, said Tillman. “It also requires the AP team to become investigators, trying to find originating documents such as proposals, bids, estimates and purchase orders. These documents can be located almost anywhere in an organization, or in anyone’s email box. It’s just inefficient.”

Bad actors may take advantage of this pain point and rely on the fact that organizations lack the manpower to check every single invoice. Especially for lower-value bills, the risk of missing an error or fraudulent charge can be high.

The biggest threat here, of course, is for an organization to pay a fraudulent or erroneous invoice. If the error is ultimately discovered, businesses then have to begin the process of trying to claw back the money they paid.

“Once you’ve paid for something, it’s a big effort to go fight and get it back,” he noted.

But this isn’t only a pain point for the payer side. Tillman added that these scenarios then require suppliers to also stop their normal business operations to launch an investigation into what happened.

“Even for benign inaccuracies, a supplier could make you jump through hoops for months,” he said, noting that because this process is so complex and time-consuming, many organizations are forced to weigh the value of clawing back funds against the pain of the process. In some cases, for instance a benign low-value discrepancy between a purchase order and an invoice, organizations may ultimately decide it is simply not worth the trouble of probing the matter with a supplier.

A Two-Sided Problem

The technology exists today to combat not only the problem of invoice fraud, but the friction of these investigations.

According to Tillman, it is a relatively simple process with little gray area: “The invoice matches the agreed purchase amount even if it needs to be calculated against a contract, or it doesn’t,” he said. “Auditing is about attending to detail, taking the time to do it, and leaving no stone unturned.”

By automating this process, errors or instances of fraud can be caught before any payment is made, saving both buyer and supplier valuable time and money. But the benefits aren’t only about finances, though, OpenEnvoy noted in its announcement that this technology can support healthier cash flow.

As Tillman noted, automating invoice auditing can also have a positive impact on the buyer-supplier relationship by avoiding sometimes nasty confrontations and scenarios in which the B2B relationship loses trust. There is opportunity here not only for B2B buyers to check every invoice that comes in, but for the suppliers themselves to ensure that bills sent to customers are correct from the get-go.

“There are also good-intentioned suppliers and vendors out there. I think most of them are,” he said. “If they could learn from their best customers ho to serve them better, that’s good for everyone. Getting your invoices right builds trust.”