In general, an invoice is a type of business statement that provides a list of goods and/or services, along with the amount of payment that is due for the items that are listed. For instance, if you are a vendor or business, then you would send an invoice to a client who still owes you money for any goods or services they received.
In other words, a business uses an invoice to bill a client. Thus, when the client gets an invoice, they can think of it as a bill. This is in contrast to a receipt, which is a business document given after a transaction and serves as proof that a client has already paid for the items or services rendered.
Additionally, an invoice may contain more than just the price, type, and number of items or services sold. It may also include the contact information of the seller or business, the date and time a purchase was made, and details regarding return policies, warranties, and other contract-like provisions.
Some reasons as to why a vendor or business may use an invoice include:
- To keep track of payments and/or amounts still owed by a buyer;
- To preserve a record of the date, time, and sale transaction;
- To protect the seller or business against future legal disputes;
- To gather consumer information, such as product trends or a seller’s most popular products; and/or
- To predict how much of an item a business needs to order to keep up with demands, or forecast how much the business will make in a given month or year.
Lastly, there are many different types of invoices that a seller or business can choose from based on their needs. The most common type of invoice is a commercial invoice, which is used to identify goods and prices owed for a sales transaction (e.g., goods shipped between a seller and buyer). A business can also use either a timesheet invoice to charge a client for the amount of services rendered, or to bill them for recurring transactions like a subscription fee.
What Is Invoice Fraud?
Invoice fraud may occur when a duplicate, fake, or inflated invoice is knowingly sent by a business to a buyer or client, with the intent to defraud that buyer or client. An invoice may serve as the basis of an invoice lawsuit if it contains false or fraudulent information for goods or services not rendered, or if the invoice is forged.
A forged invoice is an invoice that has been created, altered, or contains a false writing for the purposes of deceitfully obtaining money that is not associated with a real sale transaction or sum. For example, an individual or entity who creates an invoice that appears to belong to a legitimate business and sends it to a customer for money, may be held liable for invoice fraud due to sending a forged (i.e., fraudulent) invoice.
The act of false invoicing may also constitute invoice fraud. False invoicing is when a business sends an invoice to a customer to pay for services or goods that the business knows that customer never purchased. False invoicing differs from a forged invoice in that an invoice is usually forged by a third party, not the business itself.
False invoicing may also occur when an employee or independent contractor submits a timesheet invoice to their employer to charge them for services never rendered.
For instance, suppose a business hires outside contractors to maintain the website for their business. The contractors are responsible for keeping track of their own work using a timesheet invoice. At the end of each month, the contractors then send an invoice to the business to charge them for the work they did on the website. If a contractor bills the business for work they never did, then the business may be able to sue that contractor for invoice fraud.
Are There Any Consequences for Invoice Fraud?
Committing invoice fraud can lead to serious legal consequences. The type of penalties that a court may issue to a vendor or business who commits invoice fraud will depend on a number of factors, such as whether the case being heard involves a civil or a criminal matter.
For example, a business being sued for invoice fraud in a civil court will most likely have to pay some sort of monetary damages award to reimburse the prevailing party for any losses incurred as a result of the fraudulent invoice. If granted, the business may also be required to pay the plaintiff additional damages (on top of the damages already issued for the actual amount of money lost), and possibly punitive damages.
On the other hand, if the business is charged and convicted in a criminal court, then they may have to pay criminal fines and potentially serve some amount of jail time. The general rule of thumb for these types of cases is that the higher the amount of money stolen due to a fraudulent invoice scheme, the more severe the consequences will be for the defendant business.
In addition to any of the criminal or civil penalties mentioned above, if a business committed invoice fraud for the purposes of avoiding tax penalties, then they may be fined and punished by the Internal Revenue Service (“IRS”). Also, if the business committed invoice fraud to cash in on an insurance policy, they may be sued by their insurance company as well.
Are There Any Legal Defenses to Invoice Fraud?
A vendor or business facing invoice fraud charges and/or being sued for invoice fraud may be able to raise one of several defenses, including:
- Insufficient evidence;
- Lack of intent;
- Lack of proof;
- Entrapment;
- Coercion;
- Mistake; and/or
- Consent.
Additionally, if a vendor or business made a mistake, they may be able to amend an invoice. In general, it is possible to amend an invoice in situations where a business made an error or the invoice is missing certain information. Invoices that have not been sent to a client should simply be amended and reviewed again before being sent. However, invoices that have already been issued to a client should be amended immediately.
To properly amend an invoice, the business should notify both the client and their creditor as soon as possible. After this is done, they should do whatever necessary to remedy their mistake (e.g., refund the client, send a new invoice, etc.).
Also, regardless of the mistake, the business should always keep a copy of both the original and updated invoice. This can provide evidence that the business did not intend to send an improper invoice in the event of a future legal dispute.
Do I Need an Attorney for Invoice Fraud?
Invoice fraud is a matter that should be taken very seriously because it can lead to severe consequences. A business or seller who commits invoice fraud may face legal action in both civil and criminal court. Thus, if you are being charged or sued for invoice fraud, you should speak to a local business attorney immediately for further legal guidance.
An experienced business attorney can help you prepare a defense against a claim for invoice fraud and can explain what might happen to your business in the process. Your attorney can also ensure that your legal rights are being protected and will put in their best efforts to defend your company against improper allegations.
Finally, depending on the situation, your attorney will be able to represent you in court or during negotiations to reach a settlement agreement. Also, if you are facing criminal charges for invoice fraud, you may want to contact a local criminal defense attorney as well.
