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      For Your Small Business Tim Hadley, Senior Vice President & Director of Treasury Management Products October 6, 2026

      Hidden Fraud Risks Business Owners Should Know About

      Key takeaways: 

      • Fraud can hide within everyday business processes, including invoices and employee expense reimbursements.

      • Business owners should pay particular attention to unexpected changes, unusual transactions and requests that fall outside normal financial processes.

      • According to Tim Hadley, making fraud prevention part of everyday financial processes through clear policies, regular reviews and additional approval steps can help businesses identify suspicious activity earlier.

      Fraud isn’t always easy to spot. It can look like a routine invoice, a familiar vendor request or an ordinary employee expense. For small businesses, where owners and employees often juggle multiple responsibilities, fraudulent activity can blend into everyday transactions and go unnoticed.

      Small businesses may be particularly vulnerable because they don’t always have the same layers of oversight and internal controls as larger organizations. If one person handles multiple parts of a financial process without additional review, there may be fewer opportunities to catch something that doesn’t add up.

      I encourage business owners to look closely at the everyday processes where money enters and leaves their organization. Accounts payable, vendor management, payroll, and employee expenses can all create opportunities for fraud when appropriate controls aren’t in place. 

      Understanding these vulnerabilities and putting the right controls in place can help you catch suspicious activity earlier and better protect your business’s financial health.

      How to Identify Invoice Fraud and Billing Scams

      A busy accounts payable process can make it easier for fraudulent invoices to slip through. Scammers may send bills for products or services your business never ordered, create invoices that resemble those from legitimate vendors, or charge for more than what was actually provided.

      Before approving an invoice, confirm that the vendor, purchase, and amount match your records. Watch for warning signs such as:

      • Unfamiliar vendors: Invoices from businesses you don’t recognize or don’t have a record of working with.

      • Duplicate invoices: Multiple invoices for the same products or services, which could result in paying the same bill twice.

      • Unexpected pricing changes: Charges that are higher than usual or don’t match the agreed-upon price.

      • Vague descriptions: Invoices that provide little detail about the products or services being billed.

      • Unusual urgency: Requests that pressure you to make a payment immediately or bypass your normal approval process.

      • Changes to payment instructions: Unexpected requests to send payment to a new account or use a different payment method.

      Consistent controls can make these schemes harder to pull off. I recommend requiring supporting documentation for purchases and a second approval for payments above a certain amount. Regularly reviewing transactions for unusual or duplicate charges can also help identify problems that may have been missed during the initial approval process.

      It’s important to treat verification as a normal part of the payment process, rather than something you do only when an invoice looks suspicious. A few extra checks before money leaves your business can help prevent a routine-looking transaction from becoming a costly mistake.

      What Are the Warning Signs of Vendor Impersonation Fraud?

      Fraudsters may pose as a vendor your business already works with and request changes to payment information. Because the name or request may look familiar, an employee could update the information and unknowingly send future payments to an account controlled by the fraudster.

      Treat any request to change a vendor’s banking or payment information with caution, even if it appears legitimate. Instead of relying solely on the contact information included in the request, verify the change directly with the vendor using a phone number or other contact method already on file.

      Businesses can also establish clear procedures for updating vendor records. Requiring a second person to review significant changes or payments, for example, can provide another opportunity to catch inconsistencies before money is sent.

      Warning Signs of Expense Reimbursement Fraud

      Employee expense reimbursements are another area where fraud can hide in otherwise routine transactions. An employee might submit the same expense more than once, inflate the cost of a purchase, claim a personal expense as a business expense, or seek reimbursement for something they never purchased.

      Regular reviews can also help you spot unusual activity. Warning signs can include: 

      • Duplicate expenses: The same receipt, purchase or amount appears on more than one reimbursement request. 

      • Missing documentation: A request lacks a receipt or another record that supports the expense. 

      • Unusual purchases: An expense falls outside the employee’s normal responsibilities or the business purpose is unclear. 

      • Amounts near approval limits: Expenses repeatedly fall just below the amount that would require additional review. 

      • Inconsistent details: Dates, locations, descriptions or amounts do not align across the submitted documentation. 

      Clear expense policies can help reduce these risks. Establish guidelines for what qualifies as a business expense, set spending limits where appropriate, and require receipts or other documentation to support reimbursement requests. Employees should be aware of these expectations before making purchases on the company’s behalf. For larger or unusual expenses, I recommend requiring approval from someone other than the employee submitting the request. Adding an extra layer of review can help catch mistakes and suspicious activity before a reimbursement is issued.

      Strengthen Your Internal Controls 

      Small businesses may not have large accounting or compliance teams, but even simple internal controls can make fraud more difficult to commit and easier to detect. The most useful controls create visibility, consistency, and accountability within everyday financial processes. 

      • Separate key financial responsibilities. When possible, avoid having one person initiate, approve, and reconcile the same transaction. 

      • Require supporting documentation. Maintain invoices, receipts, purchase records, and approvals that explain why a payment or reimbursement is legitimate. 

      • Use additional approval for higher-risk activity. Apply secondary review to larger payments, unusual expenses, and significant changes to financial records. 

      • Review transactions regularly. Look for duplicates, unexpected changes, missing documentation, and activity that falls outside established patterns. 

      • Document exceptions. If a transaction must move outside the normal process, record who approved the exception and why. 

      • Make escalation easy. Employees should know where to take a question without feeling responsible for deciding whether fraud has occurred. 

      Protect Your Business by Making Fraud Prevention Routine 

      Fraud can be difficult to spot when it hides within ordinary business activity, which is why the right controls matter. I encourage business owners to focus on areas where fraud could have the greatest financial impact. Well-placed safeguards can go a long way toward protecting your business and its financial health. 

      For more ways to protect your business, follow this fraud prevention checklist and visit our business security resources. 

      About the Author

      Tim Hadley, CTP, MBA, is Senior Vice President & Treasury Management Product Director at Old National Bank. He works with commercial clients to strengthen payment controls, improve cash management, and help mitigate fraud risk through strategic treasury management solutions.

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