Your Account Validation is Flawed. Here’s Why.
Here's how to fix it.
by Ashley Poynter
Content Manager
PaymentWorksYour Account Validation is Flawed. Here’s Why.
Let’s talk about a quiet troublemaker in your vendor onboarding process: account validation.
We know — it sounds about as thrilling as watching paint dry on a purchase order. But here’s the thing: flawed account validation can cost you real money, damage relationships with vendors, and invite serious compliance headaches. All before lunch.
And the worst part? Most vendor management teams don’t even know they have a problem… until they do.
In 2025, government agencies must rethink how they manage vendor risk. This means moving beyond outdated processes, eliminating manual bottlenecks, and using automation to protect against fraud, financial loss, and compliance failures.
Table of Contents
So, What Exactly Is Flawed Account Validation?
What Flawed Account Validation Is Costing You
Oh, Also: The Rules Are Changing
Why The Account Validation Problem Is So Common (And Easy to Miss)
What Should Account Validation Look Like?
The Bottom Line: Good Vendor Management Starts at the Beginning
Get Ready for Vendor Management Day 2025
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The Illusion of “Good Enough”
Chances are, your current process doesn’t look broken. You’re collecting vendor bank details. Maybe someone in Accounts Payable gives them a quick once-over. You’ve got a W-9. A voided check. The routing number “looks right.” All boxes checked.
But if your idea of account validation is just “we entered the right numbers into the system,” you’re trusting more than you’re verifying.
And in today’s world—where fraud, human error, and increasing compliance scrutiny are part of the daily grind—that’s a risky game to play.
So, What Exactly Is Flawed Account Validation?
It’s more common than you think. Here’s how it usually plays out:
- A vendor emails in their bank info (yes, via Excel spreadsheet… still).
- Someone retypes that info into your ERP or payment platform.
- You cut the payment.
- It bounces. Or worse — it goes to the wrong account.
- Now you’re chasing the vendor, revising the payment file, reconciling finance records, and writing an apologetic email explaining how their invoice was totally legit, you swear.
Sound familiar?
That’s what flawed account validation looks like: trust without verification. It’s assuming an account number “seems right” because it has the right number of digits. Or hoping a routing number is valid because someone at some point looked it up on Google.
It’s putting a Band-Aid on a process that’s leaking time, money, and trust.
What Flawed Account Validation Is Costing You
Bad account validation isn’t just annoying — it’s expensive. Here’s what it’s really costing your team, your vendors, and your reputation:
Delayed payments
Nothing tanks vendor satisfaction faster than slow payments, especially when it’s your fault. A bad bank account means delays in days (or weeks), not minutes.
ACH return fees
Every time a payment bounces, your organization might pay a fee. Multiply that by a dozen failed payments a month and suddenly you’re funding your bank’s coffee budget.
Manual follow-up work
Vendor managers and AP teams end up in back-and-forth emails, phone calls, and spreadsheet hunting to fix what could’ve been caught up front. That’s time you’re not spending on strategic initiatives — or even just breathing.
Audit and compliance risk
For government agencies and higher ed institutions, compliance isn’t optional — it’s a mandate. Poor validation practices can compromise your audit trail, especially if a payment goes to the wrong place. The paper trail matters.
Fraud risk
Yes, fraudsters love a good vendor onboarding form. Spoofed emails, fake accounts, fraudulent banking info — these are real threats. If you’re not validating account ownership, you’re just hoping that info is real.
Oh, Also: The Rules Are Changing
Nacha, or “The National Automated Clearing House Association” (Nacha) is the governing body of the Automated Clearing House (ACH) network.
Why are we telling you this?
Because Nacha is introducing significant updates to its ACH Operating Rules, effective in 2026, aimed at enhancing fraud prevention and ensuring the integrity of ACH transactions. Here’s a breakdown of what you need to know:
Why Is Nacha Updating the Rules?
The surge in sophisticated fraud schemes, such as Business Email Compromise (BEC) and vendor impersonation, has led to substantial financial losses across various industries. To combat these threats, Nacha is mandating that organizations implement proactive, risk-based processes to detect and prevent fraudulent ACH activities.
Who Is Affected?
These aren’t small tweaks—Nacha is calling this the biggest set of rule changes in two decades. And nearly every organization that touches the ACH Network will feel the impact.
Here’s a quick breakdown of who’s affected and what their roles entail:
- Non-Consumer Originators (aka businesses, nonprofits, and public sector organizations): Must take the lead on stopping fraud at the source by verifying payment info and monitoring transactions.
- ODFIs (Originating Depository Financial Institutions): Expected to educate their customers and help recover funds more quickly when fraud occurs.
- RDFIs (Receiving Depository Financial Institutions): Must implement better monitoring to catch suspicious incoming payments and act fast when something seems off.
Compliance deadlines are as follows:
- March 20, 2026: For Originators, TPSPs, and TPSs with 6 million or more ACH transactions in 2023, and RDFIs with 10 million or more ACH receipts in 2023.
- June 22, 2026: For all other Originators, TPSPs, TPSs, and RDFIs.
What exactly are the new requirements?
Starting in 2026, every organization sending ACH payments must adopt a risk-based process to verify banking information before processing payments.
Here’s what that means in plain English:
- You can no longer assume a banking update is legit just because it came from someone who “sounded right.”
- You need documented processes for verifying bank account ownership—especially for high-risk payments.
- Nacha expects you to build a process that reflects the complexity and risk level of your organization. One-size-fits-all? Not anymore.
What does “risk-based process” mean?
A risk-based process involves tailoring fraud detection and prevention measures to the specific risks associated with your organization’s ACH activities. This approach requires:
- Risk Assessment: Evaluating ACH transactions to identify potential fraud risks.
- Process Implementation: Establishing procedures to verify bank account information through validated sources.
- Control Measures: Implementing controls to ensure consistent application of these procedures.
While automation isn’t mandatory, Nacha strongly recommends it, especially for organizations with high transaction volumes, as manual processes may not be sufficient to counter advanced fraud tactics.
Is automation required?
Not technically—but good luck keeping up without it.
Sure, you could manage ACH risk assessments with spreadsheets, phone calls, and sticky notes. But in a world of evolving threats, Nacha strongly recommends automation for two critical areas:
- Vendor onboarding: Ensures new payees are vetted before they ever touch your system.
- Ongoing monitoring: Keeps an eye on patterns and anomalies in your payment activity.
Here are some of the fraud-fighting tools Nacha endorses:
- Identity verification (name, address, SSN/TIN, etc.)
- OFAC and sanctions list screening
- Device intelligence and geolocation data
- Real-time multi-factor authentication
- Bank account verification against entity registration
- Behavioral analytics and machine learning to detect suspicious activity
Bottom line: if your defenses rely mostly on people doing the right thing under pressure, it might be time for a tech upgrade.
What happens if you don’t comply?
In the past, organizations hit by fraud were often seen as unlucky victims. Moving forward? Nacha’s view is clear: if you’re not following the rules, it’s on you.
There’s a reputational shift here—from “they were duped” to “they didn’t prepare.” And that shift could hurt a lot more than just your bottom line.
Why The Account Validation Problem Is So Common (And Easy to Miss)
The biggest reason account validation remains flawed? It hides in plain sight.
It’s not flashy. It’s not a big IT project. It doesn’t trigger alarm bells… until it fails. By then, it’s “just one vendor” or “a small glitch,” and we move on.
But multiply that across dozens or hundreds of vendors per year, and it becomes a silent drain on resources.
And for vendor managers — especially those working in local government or universities — time and trust are everything. You’re often juggling compliance rules, procurement protocols, and frustrated vendors at the same time. The last thing you need is another fire to put out.
What Should Account Validation Look Like?
Let’s reimagine what a modern, proactive account validation process looks like — one that protects your vendors and your institution.
Real-time bank account validation
Forget the guesswork. A modern system should automatically check that the routing number is valid and the account number exists, using up-to-date banking databases or APIs that integrate directly with payment networks.
No more “it looks okay to me” approvals.
Account ownership checks
This is a big one. Just because a bank account is real doesn’t mean it belongs to your vendor.
Modern solutions can now verify that a name matches the bank account on file (think: “positive pay” for vendor onboarding). Some even integrate with systems like Plaid to confirm ownership in real-time — no manual uploads required.
Built-in validation at the point of entry
The best time to catch an error? Before it enters your system.
With intelligent forms or onboarding portals, vendors enter their info and get immediate feedback if something’s wrong — instead of waiting until Finance flags it three weeks later.
That means less rework for your team, fewer delays, and a better vendor experience.
Audit-ready digital trails
Everything should be logged: who entered what, when, and what validation checks were performed. That way, when the auditors show up (and they will), you’re not digging through email chains from 2021.
Seamless integration with your vendor management workflow
You shouldn’t need to duct-tape three systems together. Modern vendor management platforms bake account validation into the onboarding flow — not as an afterthought, but as a critical first step.
That means smoother operations for you, and faster onboarding for vendors.
A Quick Litmus Test: How Flawed Is Your Current Setup?
Ask yourself:
- Can you prove you validated a vendor’s bank account before that first ACH payment? If not, you might be out of step with Nacha’s compliance requirements.
- Do we rely on spreadsheets or email to collect bank info?
- Do we ever manually re-enter account numbers into our payment system?
- Do payments ever bounce due to invalid routing/account numbers?
- Can we verify that account ownership matches the vendor name?
- If audited, can we show how and when each vendor’s banking info was validated?
- If you hesitated on any of these — you’re not alone. But you are vulnerable.
The Bottom Line: Good Vendor Management Starts at the Beginning
Vendor relationships begin the moment someone fills out that onboarding form. That first interaction sets the tone.
A flawed account validation process tells vendors: “We’re a little behind.”
A modern, secure, seamless experience says: “We know what we’re doing — and we value your time.”
So if your vendor management system still leans on PDFs, emailed W-9s, and crossed fingers, it’s time for an upgrade.
Get Ready For Vendor Management Appreciation 2025
Yes, we wrapped our second annual Vendor Management Appreciation Day (VMAD)—and YES, the party’s far from over. We’re already making plans for 2025… are you in?
Because let’s be honest—vendor management doesn’t get nearly enough love for the critical role it plays in keeping organizations running smoothly (and safely). That changes here.
🎉 Mark your calendar. Stock up on snacks. VMAD 2025 is coming—and you won’t want to miss 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.
Want Help Aligning Teams On Vendor Validation?
Explore our blogs below. They’re filled with action items you can implement right away.
Vendor Verification – Get vendor data right, always
Vendor Verification Process: How NOT to Do it and What to Do Instead
The New Face of Vendor Fraud Cases
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