Paying on phony invoices is an occupational risk for small businesses. They are regularly the target of scammers hoping to take advantage of sloppy bookkeeping, inattention on the part of employees and poor communications between the people in the firm ordering goods, those receiving them and those approving payment. All too often they are paid unwittingly along with a number of other routine bills.
Scammers have fake invoice production for such things as stationery or cleaning services, down to a fine art. Their invoice will include names (perhaps established by a prior phone call to the business for some innocuous seeming information), figures, and other details that add up to an authentic looking invoice. And they have a range of scams other than fake invoices - solicitations for the purchase of goods or services carefully designed to look like invoices for items already received; payment for listing in a directory of some sort you never agreed to; asserting that there is a government requirement for the services offered when no such requirement exists, and phony advertising to renew an ad allegedly placed ‘last year’ ... to cite just a few.
The best protection against invoice scammers is knowledge and vigilance. Your company's accounting department, or the individuals responsible for paying accounts, should be made aware of the different types of scams and how they work and you need to have a set of internal controls in place that will pick up fake invoices before payment is made. These include:
- Not placing orders over the telephone unless there is no doubt that the firm you are dealing with is reputable
- Always ask for a phone order to be followed up with the offer in writing
- Check your records to confirm claims of previous business dealings
- Channel all invoices through one department
- Read your mail carefully. Warn employees to be on the alert for any unusual invoices.
- Use pre-numbered purchase orders for every order placed
- Check all invoices against purchase orders and against goods or services received
- Verify all invoices with the person who gave written or verbal authorization for purchase
- Limit the number of people who can pay invoices to just one or two
- Never give out or clarify any information about your business unless you know what the information will be used for
In many cases the amount of the invoice is just small enough to slip by the check writer's attention. Invoice scammers build up considerable experience in calculating the most effective amount to place on the invoice. Thousands of mass-mailed invoices, each for a small sum, may prove more lucrative for the con artist than several large invoices. It is believed that invoice scammers succeed in collecting a significant percentage of all the bills they mail. While it’s impossible to put an exact figure on it, business bureaus speculate that scam invoices cost the small business sector millions each year.
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