Small businesses can’t afford to let scammers and customers make them pay out more money than they’re due
Small businesses can often be inundated by the volume of invoices arriving in their inboxes. Unfortunately, even with the best of intentions, many of these invoices can be dropped or end up lost in a spam folder. Others may be paid and then forgotten about. Whatever the reason, many businesses can find themselves in a state of invoice chaos – bills are either paid and then not filed or recorded or they’re placed on a virtual hallway shelf where they’re destined to remain, unattended.
This can prove costly to a small business. There are occasions, for example, where bills have been paid and forgotten about and the supplier – either accidentally or otherwise – sends the bill again, only for it to be paid a second time. And fraudsters have long been wise to the situation, turning it to their advantage by using sophisticated methods to send legitimate-looking invoices in the hope they’ll be paid without undergoing any real scrutiny. Indeed, a report by UK Finance reveals that invoice and mandate scams such as this accounted for more than a third of all losses to fraud suffered by the UK’s banking and finance industry in 2018.
On the lookout for signs
Fraudulent invoices can often appear very similar to legitimate invoices, although there are a few tell-tale signs that small-business owners should be mindful of. The frequency of bills can change, for example. A supplier of an ongoing service might typically invoice once a month. Should two arrive in the same month, though, it might be worth checking with the supplier in question before making any payment. The absence of a purchase order number can be a giveaway too, as genuine invoices will almost always refer to a corresponding purchase order (PO). And any request for a change in payment method – from credit card to bank transfer, say – should also ring alarm bells. Again, any concern here can be resolved by making a call to the supplier in question.
However, while carrying out such due diligence will surely pay dividends, many SME owners simply don’t have the time. With pressing matters such as marketing, business development, and customer handling to take care of, small business owners are required to keep many plates spinning at the same time. But, while all of these are essential to the running of a business, it’s also important to keep an eye on the company’s cashflow. If not, invoice chaos can soon ensue, the effects of which can threaten a business’s bottom line and, if not addressed in time, its future.
Another issue which can raise its head as smaller businesses grow towards being medium-sized is a decentralising in the business’s structure. With a main office and branches in different areas geographically – not to mention that many outsource their finance function – this can add an additional layer of complication that, again, can either lead to inadvertent double payment or allow savvy fraudsters to sneak through illegitimate invoices.
Automation is the answer
Automating a company’s core spending functions – especially its invoicing processes – will significantly ease the situation.
Interestingly, as businesses everywhere undertake digital transformation initiatives to improve various aspects of their operational efficiency, many will still manage their financial processes using nothing more than paper invoices and spreadsheets. Such manual processes are slow and cumbersome, and will only offer a view of what a business has spent weeks, sometimes even months, after it’s occurred.
Investing in an automated cloud-based system will allow small-business owners to track invoices from the moment they’re received to the moment they’re paid, matching them against corresponding purchase order numbers and supplier networks. Not only will this ensure that all invoices are paid in a timely manner it will also help avoid errors and duplication. A red flag would immediately be raised, for example, if a supplier were to submit an invoice more than once, or a particular invoice inadvertently paid a second time.
What’s more, automation would free up resources. By reducing the administrative burden, it would allow a company’s employees to spend time on other pressing business matters, which is especially important in smaller businesses with fewer staff. It’s worth noting that it isn’t a one-stop shop to invoicing nirvana and that there will still need to be the guiding hand of finance professionals on the process, but technology can give them far more efficiency than the classic spreadsheet and paper invoice combination of old.
Saving time and money
Importantly, automation can also help businesses avoid becoming victims of fraudulent activity, be it inadvertent or deliberate. By flagging those warning signs such as invoices with no corresponding purchase order numbers, it can effectively filter out attempts at fraud that a human operator might not spot, or have time to check in sufficient detail.
When every penny counts, a small business can ill afford to lose anything to the maelstrom of invoice chaos. Complete visibility over every stage of its cashflow is therefore essential, not just for immediate accounts payable activity but also to track cash-health and plan for the future. The reality of running a small business means, however, that the smaller details can often be overlooked. Mistakes can occur and fraudsters can take advantage.
Automation is a major part of the solution, providing the necessary end-to-end visibility and attention to detail that a manual approach just can’t deliver. So, when a business is digitally transforming every other aspect of its operations, why would it not do the same for this most vital function?