5 Ways to Prevent Invoice Fraud

Businesses are getting savvier with fraud prevention and the arrival of PSD2, open banking, and technology has greatly secured online payments. Yet, payment fraud like fraudulent invoicing continues to be a matter of concern still. This is because, with the growth of digitization, most businesses are interacting with more people. Some scams fall outside of formal mandates and are difficult to spot without strong operational practices and fraud control measures. Invoice fraud is one such example.

What is Invoice Fraud?

When fraudsters claim to be genuine vendors and send you fake invoices or notify you about changes in account details, it’s known as invoice fraud. They provide you with false details and wrong information and often create circumstances to coerce you to transfer funds immediately. Invoice fraud results in immediate financial loss, and it becomes tough to take any recourse.
Invoice fraud is a problem that is the same for both large and small companies. And with the growth of digitalization, it is on the rise too.

How does Invoice Fraud Occur?

Most companies have to process a lot of invoices each month. This makes it difficult to closely examine each invoice. Sometimes, fake vendors get onto the system and submit invoices of smaller amounts, making it easier to get approved. This usually happens when a business doesn’t have a proper vendor onboarding process. Moreover, fraudsters use high-end tech that at times makes it difficult for even an experienced AP team to easily pinpoint a fake invoice.

How to Prevent B2B Invoice Fraud?

From unsolicited e-mails requesting payments to fake invoices from unauthorized vendors, B2B invoice fraud can result in money loss, disrupt relations with suppliers, and even tarnish your brand image. Let’s take a look at some of the things that will help a business avoid this.

1. Automate your Accounts Payable Process

Accounts Payable (AP) automation increases visibility and makes it easier to regularly track invoices and monitor invoice amounts. Moreover, options like ‘three-way matching’ lets you match the purchase order and the slip for goods received. These give you a count of authentic invoices from real suppliers. With features like e-invoices, AP automation also saves up your time while giving you the information you need with full accuracy. It keeps your invoice process simple yet efficient, making it harder for fraudsters to request sudden payments. Further, communicating with vendors and suppliers or their finance team becomes a lot simpler, faster, and more regular.

2. Use Payment Automation

Payment automation lets you verify real payments from vendors. This gives you more data about your buyers and helps you know them properly while it is quick to catch any errors present in fake documents. With high-end fraud prevention measures, payment automation also gives you instant insights, blocks false claims, and offers better ID measures that let you check on vendors and customers as required. At the same time, payment automation brings in a better UX, and that makes it possible to build good client relations.

3. Apply Strong KYC Measures

An effective and compliant KYC process gives strong protection against B2B invoice fraud as it reduces the risk of onboarding fraudulent accounts or fake clients. Customer experience and client relations are equally important for business growth. Having your clients share only the required data, gives room to maintain trust with them while mitigating risks.

4. Use AI-Powered Fraud Prevention Tools

Using AI also helps in improving internal security apart from simplifying operations. AI-powered fraud prevention tools enable seamless authentication measures for faster and more efficient detection. Plus, with real-time insights, it’s easier to keep track of due payments. AI can work with large volumes of complex data. For high-value transactions, it enables identifying the payment history of a supplier, making it easier to manually review such cases.

5. Build Good Relations with Clients

It’s good to have a relationship of trust and respect with suppliers, vendors, and other partners. Ensure data privacy and offer flexibility of choices when it comes to payments. Get to know them on a closer level and speak to them frequently. Keep them posted on changes in company policy and stay updated about any change within theirs.

How Can Novalnet Help

Working with a global PSP like Novalnet secures your business from all sides and prevents any risk that may damage your business. Our AI-powered risk management finds the right balance between fraud protection and conversion optimization using dynamic real-time rules, machine learning & biometrics. End-to-end encrypted transactions are processed within a fully-secure PCI DSS payment system. We have extensive experience in helping Europe’s leading brands to process payments. Our technology helps you to accept payments globally in 125+ currencies in 150+ automated country-specific payment methods. Reach out to us today to know more.

Gowri Shankar Balasubramaniam

Gowri Shankar is the IT Application Security Manager at Novalnet with versatile knowledge in Programming and System/Security architecture. Having 11+ years of experience in the financial services industry, Cybersecurity, Payment Card Industry Data Security Standard (PCI DSS). Certified in Advanced Payment Card Industry Security Implementer (CPISI 2.0), Secure Software Lifecycle Professional (CSSLP) from (ISC)².