An invoice is a document sent to a buyer of goods and/or services by the seller. The document contains details about the ordered services or goods. They are used to keep track of store inventory, and to help the business operator gain an understanding of what was sold. It can also act like a receipt in some cases, providing the buyer with proof of what they purchased.
Invoices may also contain other information such as the contractual payment terms between the specific buyer and seller. The buyer receiving the invoice makes a payment to the seller based on the invoice.
Some common terms involved in an invoice include:
- Type and number of items sold;
- Contact information of the seller or business;
- Date and time stamp; and/or
- Various other items of information.
What is Invoice Fraud?
Invoice fraud refers to a fake or fraudulent invoice for services or goods not rendered. Invoice fraud can occur in many different ways besides a fake invoice such as:
- Duplicate Invoice: An invoice sent to a buyer more than once with the intent to defraud. This can occur with construction fraud when a subcontractor sends duplicate bills to a general contractor. This results in the contractor having to pay more money than is actually required.
- Inflated Invoice: An invoice with higher prices than the cost of the service or goods listed. For example, a seller may list the cost of goods as $100, but the actual cost was $50. The buyer pays the higher price without knowing the true cost.
Other types of invoice fraud may attempt to alter various other pieces of information on the invoice. For instance, there may be attempts to change the date or timestamp of the invoice in order to void a warranty or to avoid giving the purchaser a refund or exchange item. In other cases, there may be fraud or misrepresentation/misinformation with regards to the number or type of item sold.
Will I Get into Trouble If My Business Sends a Duplicate or Inflated Invoice by Mistake?
Generally speaking, a seller only commits fraud if they knowingly submitting a false, duplicate, or inflated invoice with the intent to defraud. The intent to defraud can occur by one company acting alone or in collusion with different companies. If a person acts knowingly in terms of fraud, this means that they acted while:
- Having actual knowledge of the falsity;
- Showing a reckless disregard for the falsity or truth; and/or
- Deliberately acting with ignorance of the falsity or truth.
Thus, if a seller did not deliberately intend to deceive the buyer or present false information in the invoice, it might serve as a defense to the charges. On the other hand, if the seller knowingly altered the invoice, either to deceive the buyer or to alter their personal records, then they can be found guilty of fraud.
Sometimes, invoice fraud is not done to solely confuse the buyer but also to change the records for their personal accounts. Like if they wanted to hide any missing inventory or inflate their sales numbers, typically to avoid tax issues or to deceive their partners.
What are the Consequences for Invoice Fraud?
As with any form of fraud, the consequences for invoice fraud are serious. If a company or individual is found liable for invoice fraud, they could face both civil and criminal penalties.
Civil penalties for invoice fraud include a damages award, which will allow the non-guilty party to recover any losses that stem from the fraudulent invoice. For instance, if the buyer experienced additional business losses because the invoice was fraudulent, they may be able to receive compensation for these losses as well.
Criminal consequences for invoice fraud range from fines to jail time. Depending on the amount in question, as well as other factors, the fines can be severe. State laws may vary with regards to the actual jail sentence and criminal fines involved.
If the defendant committed invoice fraud to avoid tax penalties, then they can also face serious fines and consequences from the IRS. If the fraud was done to cash in on insurance, then they can face a lawsuit from their insurance company. Since there are many reasons a person would commit invoice fraud, there are many ways the defendant can face legal consequences.
What Can I Do If I am Accused of Invoice Fraud?
Invoice fraud is a serious accusation that can result in harm to your reputation and the dissolution of any contract(s) you may have with the other party, not to mention criminal penalties. You will need to contact a local business attorney if you have been accused of invoice fraud. An attorney can help you defend your company against such allegations and prevent the nullification of the underlying contract.