ALLENTOWN, Pa.--(BUSINESS WIRE)--Most businesses today rely on vendors and suppliers for many reasons – be it to manufacture goods before they’re shipped to customers or to perform certain services that will help the business maintain operations. Regardless, vendors and suppliers are a critical part of the operational flow of businesses. But as Creditsafe’s Battling Vendor Fraud research study reveals, vendor fraud can throw things into disarray if it’s not spotted early and can cost businesses millions of dollars.
As the study reveals, 53% of U.S. businesses reported already being hit by 6 fraud cases in 2024 and another 41% have been hit by 7 or more fraud cases this year. Based on these figures, it’s likely that if a company has already had 7-9 fraud cases as of August 2024 (when the survey was fielded), then they could end up with 10-12 total fraud cases by the end of this year.
What’s especially worrying is that over half (52%) of the respondents reported that they lose over 30% of their total revenue to fraudulent activities each year. While this amount will vary depending on a company’s annual revenue, it could end up leading to millions of dollars in losses a year for larger companies. Together, these findings illustrate why it’s important for companies to make sure they have the right data in front of them before working with and paying vendors. On top of that, finance teams should be doing the necessary due diligence and cross-checking information in vendor invoices to make sure they aren’t inadvertently making duplicate invoice payments or falling prey to fake invoice scams.
Highlights from the report include:
- Fake vendors and invoice fraud topped the list of B2B fraud schemes in 2023 and 2024. Our study found that the most common types of vendor fraud in 2023 were fake identity/bad actors (43%) and invoice fraud including fake invoices and duplicate invoice payments (32%). These have also been the most common types of vendor fraud to occur in 2024 with fake identity/bad actors (47%) topping the list, followed by invoice fraud (35%).
- Fears of vendor fraud are high, making it a daily priority for finance teams. A whopping 98% of U.S. businesses are worried to some degree that their company could be exposed to vendor fraud. And of those, over half (61%) said they’re ‘very worried’ that vendor fraud could be problematic for their business. As a result, 100% of the respondents said they believe fraud detection and prevention is important to some degree in their daily roles. And of those, 70% said they believe it’s ‘very important.’
- Spotting scams is harder than it seems. As our study reveals, 70% of the respondents said they’d be alerted to potential vendor fraud if the vendor address or payment details originated from high-risk or international locations. Meanwhile, 12% of the surveyed businesses said they would suspect a vendor of fraud if the mailing address on their invoice only includes a PO Box. But only 5% of the respondents said they would be alerted to potential fraud if the invoice payment deviates from the company’s standard internal payment process and controls.
- Anti-fraud training is futile if the content and efficacy are lacking. Our study shows that 29% of finance teams are trained monthly on vendor fraud and another 21% are trained quarterly. Despite this regular anti-fraud training, only 34% of the respondents said they have successfully detected and prevented fraud 100% of the time. This indicates that the frequency of anti-fraud could end up being futile if the quality and efficacy of the training content are lacking.
Steve Carpenter, Country Director of North America at Creditsafe, sees fraud as one of the biggest challenges finance teams will face in coming years. “What I find especially interesting is that many businesses don’t realize that fraud is able to thrive because of poor data quality. Let me give you an example. You may be working with a vendor who uses a DBA (Doing Business As) instead of a legally registered name. Now if your team is using a CRM platform and the data for that vendor doesn’t match with the legally registered name of the company, you could find yourself in the situation of missing a fraud red flag if the company’s legal name is used on an invoice when all the other invoices were submitted using the vendor’s DBA name. Of course, data quality isn’t the only factor that can increase the risk of vendor fraud. As our study indicates, the quality and efficacy of training plays a major role in a company’s success rate of detecting and preventing vendor fraud.”
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Creditsafe, the global expert in credit monitoring and risk management, is the world’s most used provider of business reports. Today, over 115,000 customers globally depend on Creditsafe to make critical business decisions. Using real-time data from over 9,000 sources across over 200 countries and territories, Creditsafe’s mission is to help businesses mitigate financial, legal and compliance risks, while also empowering them to make more informed decisions. To learn more, visit our website.
