How does a P2P Network help with Invoice Fraud

If you are factoring an invoice, you are concerned about Fraud and Dilution. In traditional receivables financing, there are numerous risks that lenders face including fraud risk and the need to constantly monitor the credit worthiness of the supplier. Lenders must constantly collect information from suppliers, such as third-party credit data, invoices, payments, etc. This drives up the cost of financing for suppliers.

Recent large scale example of invoice fraud with the Italian government continues to highlight the need for initial and on-going seller due diligence and proper underwriting. TheReceivablesExchange also experienced several cases of fraud. It happens. Dewey & LeBoeuf LLP, a 3000 person global law firm allegedly cooked the books as LeBoeuf were about to violate the terms of their bank loan. - See Fraud Scares Investors Buying Invoices

If a reputable law firm can cook books, then why not a small or medium no known enterprise? If a reputable firm’s accountants can’t pick up the fraud, why would anyone else?

But P2P and einvoicing networks are in a position to reduce this type of fraud, simply put, data matters, combined with robust processes. E-Invoicing offers a number of important controls that paper invoices don’t provide.  These include, but are by no means limited to, the following:

  • AP departments are involved in suppler set-up which involves many steps, requires vendor data collection including tax, bank, payment terms, etc. Creating a complete supplier profile such as contact information, banking instructions, detailed terms, etc., involves both data collection and verification. The challenge is keeping the data up to date.
  •  Networks have valuable data on trading relationship which can be used to validate a supplier invoice. Many of these P2P networks offer sophisticated analytic tools to enable buying organizations to analyze spend data. Examples include price variances, line item details, and trend data. Any outliers can be highlighted for exception analysis.
  • AP departments also control which suppliers are allowed to submit invoices to them

If we are going to want Investors in these P2P networks, than educating them on the virtues of data and fraud reduction is important. We know how damaging fraud can be to trust.

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