Britain’s small businesses are losing more than £9bn a year to fraudsters who send false invoices, viruses posing as bills, or who pose as suppliers on the phone, it has emerged.
Of more than 1,000 small-to-medium sized businesses (SMEs) surveyed by invoice network Tungsten, almost half had received a suspicious invoice or been a victim of invoice fraud in the last 12 months.
The average firm loses £1,658 per year to invoice fraud, and one is six companies estimates that fraud has cost them more than £5,000 in the past year.
Steven Mitchell, founder of CompareTheCoffin.com, which helps bereaved customers find better deals on coffins, recently received an order for six coffins to export overseas.
The customer placed the order via email and claimed that he didn’t own a credit card and needed to pay by cheque.
“The order seemed genuine enough so I gave him my bank details,” said Mr Mitchell. “Before I knew it there was £64,000 in my account.” This was £58,000 more than billed.
“I looked into the order and saw that a cheque had been paid in to the Ruislip branch of Santander and realised he wasn’t abroad.CompareTheCoffin.com manufactures each coffin on demand but Mr Mitchell decided to wait for the cheque to clear before making the orders.
“I contacted the shipping agent who said, ‘Not him again’,” Mr Mitchel said. “The same guy had been operating with 40 different names.”
Under this scam, the fraudster requests a refund of the overpayment, which is usually arranged by the business. In the meanwhile, the cheque is cancelled leaving the business out of pocket.
“I’m a one-man band so I keep track of all orders and payments but if I wasn’t on top of things, I would have lost £64,000,” Mr Mitchell said.
Mr Mitchell now prefers to process all payments using credit cards for security and insists on speaking to customers over the phone. He verifies the identity of each customer using online tools.
The identity and location of the fraudster remains unknown, so Mr Mitchell did not report the incident to the police.
“I had no evidence of who he was,” he claimed. “There was no way to track him down.
“But I emailed him again and said I’d made up a special coffin just for him and wanted to deliver it in person.”
“Incidents of invoice fraud are underreported,” warned Pauline Smith, head of the UK’s national centre for reporting fraud and internet crime, Action Fraud.
“It’s difficult to know the true scale of this fraud type but we do know that it prevails across all types of business and no one industry is immune.”