How to avoid invoice fraud

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Invoice scams are a significant and growing threat for business owners. A 2022 report by UK Finance found that malicious redirection scams, also known as invoice fraud, totalled £56.7 million in 2021, with an average loss of over £14,000. The report also highlights that the majority of losses occurred on non-personal or business accounts where higher-value payments are made more regularly.

Amid the cost of doing business crisis, rising inflation, and increasing energy costs, it’s more important than ever to protect your small business’ financial health. Experts from FSB Business Banking explain how you can avoid falling victim to invoice fraud.

What is invoice fraud?

Invoice redirection scams happen when a fraudster tricks you into changing the bank details for payment on an invoice. These criminals target businesses by posing as suppliers, or even consumers by pretending to be businesses, for example tradespeople. They’ll often contact you asking to update your records with new payment information and insist the invoice is paid urgently.

This type of fraud leaves legitimate invoices from suppliers unpaid and businesses out of pocket. As business-to-business (B2B) invoices are often for thousands of pounds at a time, such as monthly retainers or a bulk order, this can have a devasting impact on your small business’ cash flow.

How can I protect myself?

Don’t worry, there are several ways that you can defend against fake invoices and verify whether a change to payment details is legitimate.

• Emails can be hacked or made to look very similar and fake paper invoices can easily be created. Check any requests to change payment details with your supplier before making payments. Contact your supplier using a trusted phone number or email address. They’ll be reassured that you’re protecting their interests too.
   
• Beware of any requests for urgent payments, especially if you weren’t expecting an invoice from your supplier. For example, if you always pay invoices at the end of the month, a payment request in the middle of the month would be unusual. Even if they appear to have been sent from someone in the business, you should always exercise caution.
   
• If you have staff who process your invoices for you, make sure they’re aware of the warning signs of scams and remind them to raise any concerns about unexpected payment requests or changes to supplier information.
   
• Email attachments that appear to be invoices shouldn’t be downloaded from unknown senders – this is a common technique of phishing scams. Instead, you should double-check whether your supplier has sent an invoice.
   
• Compare the invoice with the ones you know are genuine. Often, it’s easy to spot if it’s a fake invoice, as it might have irregular formatting or blurred logos.
   
• Be mindful of information on your company website or social media. With more small businesses adapting and pivoting to e-commerce, you should be careful of any publicly accessible information that fraudsters could take advantage of, such as information about your relationships with suppliers.
   
• If you’re paying a new supplier, consider transferring a small amount first and then confirming with the supplier that the payment details are correct and payment has been received.
   

I’ve been a victim of payment fraud – what do I do?

Contact your bank immediately. FSB members with an FSB Current Account should contact The Co-operative Bank.

Reporting any fake invoices to Action Fraud can help to stop other businesses from being targeted by the same fraudster.

Protect your business against fraud

The Co-operative Bank has more guidance on the most common types of fraud and how to safeguard your business against them. Their fraud prevention guide for businesses is packed with more expert guidance and practical advice on fighting fraud and protecting your business.