Given the extraordinary downturn in the economy, especially in the oil and gas sector, many companies are experiencing an increase in vendor and service provider issues ranging from invoice errors to outright fraud.
Stinnett’s Vendor Risk Management Services team views this problematic trend as symptomatic of the incredible pressure exerted on the industry which continues to face a greater risk of error and fraud.
Consequently, companies are discovering the criticality of continued, even increased, vigilance in monitoring vendor and supplier activities and billing. Even before the pandemic hit, research shows that 60% of organizations felt underprepared to perform due diligence on their vendor.
Consider taking the following measures to combat vendor fraud in your organization.
Implement short reviews of a vendor’s financial situation to verify they are legitimate and not in danger of financial failure. Financial pressures can also be a lead indicator of future billing issues and fraud.
New Vendor Screening
During the new vendor approval or onboarding phase, use viability checks plus public record searches on the company and its principals to confirm their legitimacy. These searches could reveal suspicious discrepancies or other issues that may signal potential trouble.
Targeted Vendor Audit
Perform regular, routine audits of key vendors including verification of invoices and the work performed. This helps you and your company develop a reputation for diligence with your vendors.
When suspicions arise concerning a vendor, do not hesitate to investigate further directly or by bringing in specific expertise to protect your company.
Vendor-related Process Consulting
Review your controls related to accounts payable and invoice verification; vendor approvals and monitoring management; contract management and vendor onboarding procedures. Given the nature of today’s new business normal, Stinnett recommends implementing extra controls to protect against vendor-related issues.