Split Invoicing

Split invoicing -- also called invoice splitting or threshold splitting -- is the practice of dividing a single purchase or obligation into multiple smaller invoices in order to keep each individual invoice below an approval threshold. In legitimate procurement, split invoicing is sometimes done for operational reasons. In the context of fraud and control evasion, it is used deliberately to avoid the additional scrutiny, second sign-off, or competitive tendering requirements that apply above a certain value.

Most AP approval frameworks set tiered approval requirements based on invoice value. A common structure might require one approver for invoices under AU$5,000, two approvers for AU$5,000 to AU$25,000, and a board or CFO sign-off for values above AU$25,000. These thresholds are designed to ensure that material expenditure receives appropriate oversight. Split invoicing defeats this design by breaking one AU$30,000 obligation into six invoices at AU$5,000 each, each of which is approved by a single person without the broader review the combined value would have triggered.

Legitimate versus fraudulent uses

Split invoicing is not always fraudulent. Suppliers sometimes issue invoices in stages as work is completed -- progress billing on a construction project, for example, produces multiple invoices against a single contract. Software licensing is often invoiced monthly rather than annually. These are legitimate business arrangements that result in multiple invoices without the intent to evade controls.

The distinction is intent and disclosure. Legitimate staged invoicing is documented in a contract or purchase order that the AP team can reference. The split is known and sanctioned before the work begins. Fraudulent split invoicing involves no pre-authorised contract, occurs below the approval threshold that would apply if the total value were known, and is often structured specifically to avoid requiring a purchase order at all.

How to detect split invoicing

Manual detection of split invoicing is difficult because each individual invoice looks legitimate in isolation. Detection requires looking across invoices over time rather than at individual invoices in the queue. The signals to look for include multiple invoices from the same supplier for the same or similar amounts within a short time window, multiple invoices with consecutive or near-consecutive invoice numbers from the same supplier in a single period, and a pattern of invoices that consistently land just below approval thresholds -- particularly if the same supplier's invoices have historically been at higher values.

AP analytics tools can automate these pattern checks, flagging supplier-period combinations where the aggregate invoice value over a rolling 30 or 60 day window exceeds a threshold even if individual invoices do not. This cumulative view of spend by supplier is something a manual review of individual invoices in an approval queue will never surface.

Procurement policy should require a purchase order for any relationship where cumulative spend with a supplier exceeds a defined annual threshold -- regardless of individual invoice values. This converts the split invoicing detection problem from a transaction-level check to a supplier-level spend management question, which is far easier to govern consistently.

When split invoicing is detected, the appropriate response depends on whether it was intentional. Where a supplier has genuinely been issuing progress invoices against an undocumented arrangement, the resolution is to retroactively document the agreement and require a purchase order for future work. Where the split appears to be deliberate threshold avoidance by an internal approver or in collusion with a supplier, it should be escalated to a fraud investigation process regardless of whether the underlying expenditure was legitimate, because the control evasion itself is a material compliance failure.