A Primer on Supplier Identification

by Ashley Poynter

Content Manager

Who Are You Doing Business With? A Primer on Supplier Identification

Supplier identification can be a touchy subject for vendor managers. Considering the manual labor involved in the process, we don’t blame them. Understanding who you’re doing business with is a labor-intensive process, especially for vendor managers who are relegated to non-standardized, paper-pushing tasks that seem (and might well be!) neverending.

We believe vendor managers know better than anyone that knowing who you’re doing business with is as crucial as knowing what you’re doing. Still, it’s easy to become disheartened when your organization is stuck in the dark ages. Not only does it amount to more tedious, error-prone work, but it kicks the door wide open to fraud. Let’s talk more about this – and how to make it simpler

What is Supplier Identification?

Why is supplier Identification Important?

What Most Organizations Miss When It Comes to Supplier Identification

— Reliance on manual processes

— Lack of comprehensive data validation

— Fragmented systems and tools

Supplier Identification: Paper and Email vs. Portal

Portals for Next-Gen Supplier Identification

Embrace the Future of Supplier Identification

Get Ready for Vendor Management Appreciation Day 2024

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What is Supplier Identification?

Let’s start with the basics: what exactly is supplier identification? Imagine you’re throwing a big party. You’d want to know who’s on the guest list, right? Supplier identification is essentially that—knowing exactly who you’re inviting into your business operations. It involves collecting, verifying, and managing information about the suppliers your company engages with.

Think of it as creating a robust profile for each supplier that includes their legal name, address, tax identification number, banking details, and other critical information. This isn’t just about having a Rolodex of contact details; it’s about ensuring that every piece of information is accurate and verified.

Why is Supplier Identification Important?

Why bother, you ask? Well, let’s put it this way: would you trust a random stranger with your wallet? Probably not. Supplier identification is your first line of defense against fraud, compliance risks, and operational inefficiencies. Here’s why it’s non-negotiable:

Fraud prevention

Fraudsters are crafty. They thrive on disorganization and the opportunity to slip through the cracks. Without proper supplier identification, your business is a prime target for vendor impersonation fraud. Imagine receiving an invoice from what appears to be a trusted supplier, only to find out later it was from a fraudster who made off with your money. That’s a nightmare scenario that robust supplier identification can help you avoid. Think it can’t happen to you? Christopher Arehart of Chubb will convince you why it absolutely can:

Compliance assurance

Regulatory compliance is no joke. Governments and industry bodies impose strict regulations on how businesses should manage supplier information. Non-compliance can be expensive and damaging to your reputation. By properly identifying and verifying suppliers, you ensure that your business stays on the right side of the law.

Operational efficiency

Manual processes are the bane of efficiency. They’re slow, error-prone, and labor-intensive. Proper supplier identification streamlines your operations, making it easier to manage supplier information, process payments, and maintain accurate records. This saves time and cuts down on costly errors.

What Most Organizations Miss When It Comes to Supplier Identification

Alright, let’s talk about what most organizations get wrong. Many businesses assume that a simple spreadsheet or a basic database is enough to manage supplier information. We’ve got some news: it’s not. Here’s where they often falter:

Reliance on manual processes

Many organizations still rely heavily on manual processes to collect, vet, and enter supplier information into their ERP systems. This piecemeal approach is not only inefficient but also a breeding ground for errors and fraud. Manually verifying vendor details means you’re only as reliable as your least attentive employee on their most distracted day. And it’s not their fault! We’re humans, not robots. No one is built to do tens of thousands of verifications. It’s just not a feasible ask.

Lack of comprehensive data validation

Even those who use some form of digital tool often miss the mark on comprehensive data validation. Simply put, it’s not enough to collect information; you need to verify it. Without validation, you could be dealing with outdated, incorrect, or fraudulent data, which opens the door to all sorts of risks.

Fragmented systems and tools

Using multiple third-party tools for different aspects of supplier management can lead to fragmentation. When your data is scattered across various platforms, it’s difficult to maintain a cohesive, accurate view of your suppliers. This disjointed approach increases the risk of oversight and errors.

Supplier Identification: Paper and Email vs. Portal

Now, let’s talk about the evolution of supplier identification—from the dark ages of paper and email to the enlightened era of digital portals. Here’s why you need to make the leap if you haven’t already.

The dinosaur era: paper and email

Relying on paper forms and email communications to manage supplier information is like using a rotary phone in the age of smartphones. Sure, it technically works, but it’s incredibly inefficient and prone to problems.

Additionally, it’s time-consuming. Large, decentralized organizations are tasked with manually verifying tens of thousands of vendors. Just ask Hannah Kanouff, the Vendor Management Coordinator for Penn State University:

It’s not uncommon for teams to spend countless hours entering data, verifying details, and following up on missing information.

Then, there’s the possibility of human error. Here’s the thing: it’s inevitable. This type of manual work is inherently error-prone. Typos, misplaced documents, and miscommunications are par for the course, leading to inaccurate records and potential fraud.

And let’s not forget how insecure this manual work is. Paper and email are not secure. Sensitive information can be easily intercepted, lost, or accessed by unauthorized individuals.

The digital revolution: supplier portals

Enter supplier portals—the next-gen solution for supplier identification. These digital platforms automate and streamline the entire process, providing numerous benefits over traditional methods.

Pros of supplier portals

Automation: Supplier portals automate the onboarding process, reducing the need for manual data entry and verification. This minimizes errors and saves time.
Centralization: All supplier information is stored in a single, centralized platform, making it easy to manage and access.
Enhanced security: Digital portals offer robust security features, protecting sensitive information from unauthorized access and fraud.
Efficiency: Automating processes and eliminating paper/email collection speeds up onboarding and improves overall efficiency.

Debra Richardson of Debra Richardson LLC does a nice job summarizing the benefits of a portal versus using risky email and relying on manual tasks:

Portal for Next-Gen Supplier Identification

Now, let’s talk about why automated platforms are the best option for supplier identification. Imagine a world where you don’t have to chase down vendor details, manually enter data, or worry about fraud. Sounds dreamy, right? Here’s why you should consider making the switch.

End-to-end automation

Automated platforms handle data collection, initial and ongoing verification, compliance checks, and more. This end-to-end automation eliminates the need for manual data entry and verification, ensuring that all information is accurate and up-to-date. Your team can focus on strategic tasks rather than getting bogged down in administrative work.

Identity verification

One of the key advantages of automated platforms is their ability to verify the identity of suppliers. This means you can be confident that you’re doing business with legitimate entities, not fraudsters. Automated identity verification removes the guesswork and human judgment calls, providing a higher level of security and reliability.

Compliance

Ensuring compliance with internal and external regulations is a breeze with automated platforms. They can automatically check for compliance with various regulatory requirements, reducing the risk of fines and legal issues. Plus, they maintain detailed records that make audits a walk in the park.

System agnostic

Modern automated platforms are designed to work with any ERP system, making integration seamless. Whether you’re using SAP, Oracle, or a homegrown solution, these platforms can fit right in without disrupting your existing processes.

Fraud warranty

Some advanced platforms (ahem, Paymentworks) even offer a fraud warranty aka indemnification, offloading the risk from your organization. This means that in the unlikely event of a fraud incident, the platform provider takes on the liability, providing you with an extra layer of protection and peace of mind.

Financial optimization

Automated platforms can also optimize financial processes by transitioning vendors to Automated Clearing House (ACH) payments. ACH payments are faster, more secure, and provide better tracking capabilities compared to physical checks. This can reduce the risk of fraud while improving cash flow and financial efficiency.

Embrace the Future of Supplier Identification

Knowing who you’re doing business with is more important than ever. Manual processes and siloed systems and processes just won’t cut it. To protect your organization from fraud, ensure compliance, and optimize operations, you need to embrace next-gen supplier identification solutions.

Automated platforms offer a comprehensive, secure, and efficient way to manage supplier information. By moving away from paper and email and adopting digital portals, you can transform your supplier management processes, safeguard against fraud, and position your organization for success.

So, who are you doing business with? Make sure you know the answer by investing in robust supplier identification practices. Your organization’s security, compliance, and efficiency depend on it.

Get Ready For Vendor Management Appreciation 2024

Speaking of vendor onboarding best practices, will you be partying with us for Vendor Management Appreciation Day (VMAD) 2024? We highly encourage you to join us!

Why? Because there’s no expiration date on honoring one of the most important, under-recognized roles across industries: vendor management.

Join us in observing Vendor Management Appreciation Day (VMAD)! We’re gearing up for the 2024 celebration, and we want you to be a part of it!

VMAD is a new holiday geared toward unifying vendor management professionals and celebrating innovation in the field.

Moreover, we’ve released gifts each month to help you supercharge your vendor management efforts. Additionally, we’re planning some awesome events so everyone can connect and celebrate the important, strategic role of vendor management.

In the meantime, learn more here, and grab some free vendor management goodies.