One-third of UK businesses hit by invoice fraud in past year

Nearly a third of UK businesses have fallen victim to invoice fraud in the past 12 months, according to new research from Ivalua, a company specialising in spend management. The study, which surveyed 300 supply chain and procurement decision-makers, found that only 39% of those businesses managed to stop the fraudulent transactions before the money was paid out.

The findings highlight a significant vulnerability among UK businesses yet to digitise their invoicing processes. Currently, almost two-thirds (64%) of UK businesses have not automated the process of matching incoming invoices against orders, contracts, and vendor payment information. As a result, more than half (52%) of respondents believe that businesses without automated invoice matching are particularly susceptible to fraud.

“Invoicing is an area ripe for fraudsters and cybercriminals," commented Stephen Carter, Director of Payments Strategy at Ivalua. “They will typically use low-value invoices that look genuine to direct payments into bogus bank accounts. Many of these fake invoices are waved through by employees because they look convincing, and the amounts are often below payment thresholds or lower than the expected value. Organisations also face risks from fraudsters working within the business. This insider threat involves senior employees flipping supplier bank details within payment runs to pocket the cash themselves - this activity is hard to track, and ripe for exploitation."

Carter added, “These scams are not the most technologically sophisticated threats, but they’re still happening, so it’s clear better safeguards are needed. By digitising processes, organisations can automate invoice matching against orders, contacts, and block vendor information changes - such as payments or bank details. This allows organisations to segregate duties, remove thresholds, and only pay approved suppliers, eliminating the opportunity for fraud.”

Alongside concerns of fraud, the study also indicated that UK businesses are paying their suppliers later than ever before, exacerbating cash flow crises. On average, businesses are paying suppliers 26 days later, an increase from 22 days in 2023. According to The Federation of Small Businesses, 50,000 UK business closures could be avoided each year if businesses were paid on time. However, the study found that 49% of UK businesses are paying suppliers later than they did a year ago, and 50% are delaying supplier payments by a month or more.

A third (32%) of UK businesses reported difficulties in confirming whether suppliers had been paid, while a further 63% agreed that late payments put the organisation at risk of losing key suppliers. Closing communication gaps between finance and procurement teams was identified as a key challenge, with 39% of procurement leaders citing a significant communication gap between these departments.

Rob Scriven, Head of Supply Chain at ISG, a global construction specialist, discussed how addressing these issues can benefit both businesses and suppliers. “To support our supplier partnerships we are always looking at ways to speed up our invoice processing time. Ivalua has helped us to bring the average invoice processing time down from 22 days to 2 days, and we're still seeing improvement month on month. The number of discrepancies found in invoices has also reduced. This helps us to boost supplier relationships while also reducing risk."

By paying suppliers on time, organisations can build the trust needed to secure materials and workers, making them the customer of choice. This approach also reduces the risk of fraud and business disruptions. Carter concluded, “Without total visibility of both cash and suppliers across the whole spend cycle, payments will continue to be late and the risk of fraud will increase, leaving businesses to play catch-up. Meanwhile, suppliers are being put out of business, causing supply chains to grind to a halt. UK businesses need to become more strategic about payments to reduce risk and drive long-term savings.”