Invoice Fraud is Quietly Draining Over $1 Million from Companies Each Year

Invoice fraud is quickly becoming one of the most damaging threats facing businesses today. A recent survey of senior finance executives in the U.S. and U.K., published by David McCann at CFO.com, revealed that finance teams experienced an average of 13 attempted cases of invoice fraud last year, with 9 of those attempts succeeding. These incidents cost U.S. companies an average of $133,000 per occurrence, adding up to over $1.2 million annually for many businesses.

According to the study, conducted by Medius, a provider of advanced accounts payable solutions, fighting invoice fraud effectively requires a combination of best practices and technology. Here are five key strategies highlighted in the report:

1. Employ 3-Way Matching

Matching purchase orders, invoices, and receiving reports is critical to ensuring that all three documents align before any payment is authorized. This step helps eliminate discrepancies and reduce opportunities for fraudulent invoices to slip through.

2. Validate Supplier Data

Ensuring the accuracy of supplier information is crucial in preventing fraud. Companies should consistently check and verify supplier data to ensure they are dealing with legitimate vendors.

3. Review Invoice Activity and Amounts

Regularly reviewing invoice activity and comparing amounts to historical patterns can help identify unusual or suspicious activity. This ongoing review process serves as an early warning system for potential fraud.

4. Establish Multi-Stage Authorizations

Having multiple layers of approval for invoices, especially those above a certain threshold, reduces the risk of fraudulent transactions going unnoticed. Implementing a multi-stage approval system ensures that no single person has complete control over payments. This kind of internal control is key to preventing fraud.

5. Use Anomaly-Detection Technology

The Medius report emphasizes the importance of technology in detecting fraud: "AI anomaly-detection technology can provide employees with the evidence and assurances they need to be more forthcoming." By leveraging anomaly detection through machine learning, companies can identify suspicious activity before fraud occurs, providing an essential line of defense against financial losses.

Internal Fraud and Corporate Embezzlement: Hidden Threats

While invoice fraud is a major concern, internal fraud—like corporate embezzlement—is another serious issue that often goes undetected. Alarmingly, 81% of finance professionals admitted that they remain silent when they suspect internal fraud, largely due to fears of retaliation. Without a system of checks and balances in place, fraudulent behavior within an organization can continue unchecked for months or even years, causing financial and reputational damage.

The Medius report reveals that the risks of internal fraud are heightened when 57% of financial professionals can make financial transactions independently, without additional approval. This highlights the need for stronger access controls and oversight.

Enterprise Fraud and Continuous Monitoring

The rise of enterprise fraud means that companies must also be vigilant beyond traditional internal controls. By implementing continuous monitoring, finance teams can track anomalies in real-time, reducing the chance of both external and internal fraud going unnoticed. Continuous monitoring not only detects financial fraud but also helps in early identification of high-risk activities, ensuring issues are caught before they escalate.

Is Your Company Prepared?

Despite the growing risks, many businesses are not adequately prepared. Only 13% of organizations have both finance and IT teams working together on fraud prevention, highlighting a significant gap in internal collaboration.

By combining robust risk management controls, multi-stage authorizations, and AI-powered fraud controls, companies can better protect themselves from both external and internal fraud. Safebooks AI offers real-time monitoring, automated controls, and AI audit tools to help organizations prevent fraudulent activity before it happens—ensuring that finance teams can trust their numbers and focus on strategic decision-making.

Source: Findings and data from the Medius Financial Census 2024.