5 Ways Your Vendor Master is Costing You Money – Mistakes & Fraud Edition
Mistakes are going to happen in any business, at least any business that involves humans. There really isn’t any way around that.
Mistakes are going to happen in any business, at least any business that involves humans. There really isn’t any way around that.
While it would be wonderful to eliminate the scourge of mistakes completely, that just isn’t realistic. The goal, instead, should be to minimize exposure to risks while decreasing the high costs that come with onboarding and maintaining your vendor master. And make no mistake, the costs are indeed high. Benchmarking among our customer base indicates it costs $100-200 to onboard and maintain each of your vendors, each and every year you keep them on your vendor master!
You would never ask a goalie to take a penalty shot, a fireman to perform heart surgery or a lawyer to change the alternator on your car. It’s just not their job. So why are you asking somebody who isn’t in procurement or accounts payable to collect tax ids, remit addresses, and W-9s?
Expecting employees who aren’t familiar with collecting and vetting the credentials associated with vendor onboarding to do this collection, positions them as a ‘go-between’ the vendor and your AP department. This not only opens your organization up to the mistakes that come with the other four items on this list, it wastes tons of valuable time.
While you may want your employees to have the say in who they do business with, having a central point tasked with collecting vendor documents will eliminate many potential fraud vectors and reduce many of the hidden costs that go into the $100-200 you pay per year to onboard and maintain each vendor.
How this costs you:
The human element of mistakes runs the gamut from typos to using an old remit address to attributing a piece of information to the wrong company. It’s also, shockingly often, just sloppy handwriting — ask anyone who has ever had to decipher a handwritten W-9.
If you are leaving things to chance by asking your AP staff to collect and input information manually from paper forms into the ERP, then I promise you, your data is not clean.
How this costs you:
If you already have a main point that collects all of this vendor info, good for you! Next I’ll ask if you’re leaving it up to an employee to use their own judgment to determine if what they have collected is legit? Better yet, if changes related to what is already in your ERP (a name change or a banking change request) are legit? If so, you’re opening yourself up to a world of hurt.
Giving your staff tools to confirm the vendor credentials relieves them of the significant stress of attempting to ascertain what is true and what is a scam. By using third parties to confirm credentials like TIN, address and banking, your organization will have much greater peace of mind.
How this costs you:
This one is the big fear: payments fraud. Social engineering is the easiest way for a fraudster to steal your cash. It doesn’t even require the savvy of a computer hack (though it often starts that way). Social engineering is essentially when one party uses email or the phone to trick another party into doing something they believe is legitimate — usually involving transferring large sums of money into a fraudster’s bank account. These types of fraudulent scams can happen on scales large and small– you probably read about them every day.
If your current process allows for payment details to be changed because your AP staff received an email with new banking instructions, then please put this risk at the top of your list of ways your vendor master is costing you, because sooner or later, someone is going to get fooled.
How this costs you:
This might be a fraud vector that some people don’t worry about too much. Because you trust your employees, right? Depending on who has access to your ERP, someone on the inside could change bank account details.
This risk alone would be enough of an argument to get out of the business of storing bank account numbers, but you’re also vulnerable to bad actors on the outside being able to hack into your ERP and change an account number. So finding a partner or system that takes banking accounts out of your ERP could eliminate a huge fraud vector that you might not even be considering at the moment.
How this costs you:
Taking necessary precautions to reduce fraud and human error is just smart business. Audit these five areas now and preemptively put in roadblocks will save you time, money and allow your employees to mind your business, and stop worrying about threats.
We’d love to walk through your process with you and talk about security, compliance, efficiency and sleeping better at night.