Contract Surety

Invoice Scam?



Contractor? Are you being scammed? Experts say there’s a good chance you might be, given that middle market companies are averaging about $300,000 of losses annually due to incremental invoicing scams. In other words, invoice fraud, in small doses, may be going under the radar—but the losses add up. Here’s what to know—and do.


Illegitimate Vendors

A primary reason invoice fraud frequently goes undetected is failure to reconcile accounts. Scammers are smart: they submit bills that are small enough not to raise eyebrows in a busy company. When time and resources are scarce, it’s convenient to just get the bills paid—and assume they are legit. As Construction Dive reports, the lapses in scrutiny add up:


Middle market businesses on average are losing almost $300,000 annually to invoice fraud, according to a recent survey by…Medius and Censuswide.  “Invoice fraud is something thats happening all the time but people dont talk about it because its embarrassing, it hurts their brands and it hurts their supplier relationships,” Branden Jenkins…at …Medius, said….What ends up happening is vendors that are not legitimate will get into your system and submit invoices that are a low enough dollar amount and just get approved…Its a volume game —theyre not big enough to trigger approvals.” This is one of the top scams….It comes when the businesses do not have a process in place to properly vet and set up a vendor. Such a system would make sure there are multiple people within the company ensuring vendors are on the payable vendor list as well as using third-parties to verify that they are legitimate companies….


According to experts, invoice spoofing is another tactic in use that hurts the bottom line in construction companies. Invoices may appear to come from a valid vendor, yet contain a slight change in remittance details, like a tweak to the ACH routing number or payment submission address. As Jenkins explains Just enough is changed so when you get the invoice you say, oh yeah, thats a valid vendor, were paying it, it says here to update the banking information, no problem,and then that money is diverted to a fraudulent account….” Considering the number of invoices most builders are typically paying, it’s easy to see how these fake invoices are slipping through the cracks. The perpetrators may even be involved in some way with vendors and banks, making it relatively convenient to spoof legitimate documents. Meanwhile, since about 40% of businesses are still “snail mailing” checks, interception remains a tried and true tactic for fraudsters: “Checks get intercepted all the time; fraudsters will edit and change the name, digitally capture the check, change the pay-to information and then deposit it in their account….”


Back To Basics

Reconcile! That’s what experts encourage to ensure that “every single check” is a positive pay and curtail invoice fraud. Of course, these days, a variety of tech apps can help with the processes of invoicing and reconciling—but applying them successfully still requires ongoing diligence with business protocols.


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Founded in 1930, Colonial Surety Company is a leading direct seller and writer of surety bonds and insurance products across the USA. Colonial is rated “A Excellent” by A.M. Best Company and U.S. Treasury listed.