Invoice Fraud Costs the Average UK Business £295,000+ a Year

Posted on 21st October 2022

New data examines the top challenges of finance teams in 2022: rising fraud, retaining talent, late supplier payments, and the relationship with procurement

Financial professionals estimate over £295,000 is lost to invoice fraud per business, every year in the UK. Even more shocking is the fact that 1 in 5 (20%) finance professionals are unaware or unable to even estimate the cost of invoice fraud to their business. This lack of visibility is likely due to the messy paper trails that continue to plague the invoice process.

With invoice fraud on the rise, the question arises, who in the business is responsible for preventing invoice and payment fraud? In over half of organisations (56%), the responsibility is not shared between finance and IT.

To paint a complete picture of the challenges facing finance departments, Medius, in partnership with Censuswide, recently surveyed 2,750 senior finance executives globally, including 501 finance executives in the UK.

UK finance teams face highest churn globally

With mounting pressure on finance teams, they have the added struggle of high employee churn and challenges recruiting qualified staff – a problem that’s particularly acute in the UK. Almost 20% of finance professionals in the UK leave after 7-11 months, almost 10% higher than any other market surveyed. Across the globe, the average tenure in the finance teams is 30 months.

As businesses struggle with high staff turnover, finance professionals are a particular flight risk. In the UK, 27% say their finance department is so busy they are concerned colleagues are on the cusp of leaving, and 26% report having a high churn rate in the team. One of the problems reported by finance teams is the nature of the job – 21% feel their job is dominated by monotonous and boring tasks, and 36% of professionals think they are working with outdated payments software.

London lags behind UK for automation in finance with implications for payments

At the same time, London lags behind the rest of the UK when it comes to automating finance departments, where only 25% of respondents track and measure their automation practices. In contrast, 31% of UK finance departments track and measure automation, rising to 33% in large companies, and to 43% in the US – which is leading globally for automation practices.

As a result, over a third of finance professionals (39%) say they can’t close their books on time and paying supplier invoices remains the biggest challenge for the finance department in 39% of UK businesses. Furthermore, in the UK, businesses take the longest time globally to process invoices, coming in at 27 days, 13 days longer than Denmark, where it only takes an average of 14 days.

Account professionals admit 51% of supplier payments are late

In the UK, account professionals admit that the majority (51%) of supplier payments are late, lower than the global average of 56%, but with significant room for improvement compared to Finland, where only 44% of supplier payments are late. At the same time, 98% of UK businesses say they would like to take advantage of early payment discounts, and 79% offer early payment discounts themselves.

Deciding when to pay a supplier has a direct impact on cash flow but can also damage supplier relationships and the external reputation of a business. To increase transparency and aid decision-making for businesses, in 2017, the Department for Business, Energy, and Industrial Strategy introduced new requirements for large businesses to self-declare supplier payments data.

Relationship troubles: 39% say it’s costing the business cash

The report revealed that one of the most prominent issues leading to late supplier payments is the relationship between procurement and finance. A healthy relationship between procurement and finance can transform an organisation, whereas a bad relationship can lead to missed opportunities for supplier discounts, increased errors and time spent managing payments, a lack of transparency and oversight, and damage relationships with suppliers.

In the UK, 72% of respondents stated that they either didn’t work with procurement at all (32%), or only occasionally worked with procurement (40%). When they do work together, 51% of respondents in the UK claim they are not satisfied with the cooperation, the highest level of dissatisfaction across markets – at the other end of the scale is Denmark, with only 4% of respondents dissatisfied with the relationship.

Jim Lucier, CEO, Medius, said: “Invoice fraud is on the rise, while global supply chains are becoming more complex. Finance and AP teams face numerous challenges in an increasingly complex business environment. They need technology to move from automation to elimination – eliminating the invoice, fraud, and wasted time on needless manual tasks. As a technology provider, we still have work to do to help them solve these challenges and we’re 100% focused on doing just that.”

Kevin Permenter, Research Director, Financial Applications at IDC, comments: “For the past three to five years, we’ve seen finance and procurement teams play a game of ‘whack-a-mole’ as they respond to global economic fluctuations and the rapid digitisation of processes. Not surprisingly, they are struggling to keep up with the ever-evolving shift in customer expectations, heightened risk and vulnerabilities, and challenges caused by global supply chain issues. It’s a tough environment for even the strongest of teams.”