Onboarding a vendor without having proper guidelines in place can severely impact your business. Vendor onboarding fraud and the consequences that come along can be fatal for a business. So, how can you know the vendor you’re onboarding is the right is not a fraud?
Every business regardless of its nature of business needs to have a vendor onboarding checklist. To avoid instances of fraud that can harm your business, you need to follow the required due diligence.
One of the biggest parts of vendor onboarding is to make sure that you’re keeping up with all the changing laws, rules, and regulations.
What is Vendor Onboarding?
Vendor onboarding is the process of collecting all the crucial information that you need to approve a vendor for your organization. A vendor allows businesses to buy supplies without having to go through a long process. Vendors in turn issue invoices for businesses. Let’s say you onboarded a fraudulent vendor, they’ll end up issuing invoices for things you haven’t purchased. This is how most fraudulent vendors operate and earn money.
The vendor onboarding process needs to have an ideal checklist. By following the checklist, every business can make sure they’re onboarding the right vendor.
Vendor onboarding is the first step of the vendor management process. If a business doesn’t have a vendor onboarding process, it can become a part of fraud. When you follow a vendor onboarding checklist, you can reduce the risk of fraud, eliminate additional costs, and achieve a higher ROI.
When you build a vendor onboarding process for your business, it becomes easy to avoid pitfalls that come along with bad vendor management.
Not just customers, you also need to nurture relationships with your vendors. A well-thought-out vendor onboarding process can help you make your relationships with vendors strong. It also offers other benefits:
To start building your vendor onboarding process, you need to keep a couple of things in mind:
To make the process easier, you need to make sure that you’re not missing out on any crucial factors.
Here’s a vendor onboarding checklist you can use.
Hiring a vendor that has a poor track record can be risky. You need to evaluate the level of risk a vendor brings along with them. Here’s how you can do so:
All the vendor information should be available for access by some teams, including:
Your vendors should have all the necessary information when they enter into a relationship with a business.
Here’s a list of what you should share with vendors:
Importance of Proof of Address Verification In Vendor Onboarding
Proof of address verification in vendor onboarding is a step that a lot of businesses ignore. Verifying where a business comes from plays an important role in figuring out if they’re genuine or not.
Let’s say there’s a location that’s famous for having risky vendors, or there’s a location that your business doesn’t serve. How would you know the vendor is not from the location?
That’s where online proof of address verification comes in. When you verify a vendor’s proof of address, you can make sure you’re not getting into a relationship with a fake vendor.
DIRO online proof of address verification can help you verify the address of your vendors by verifying the documents provided. DIRO provides 100% accurate results instantly, using proprietary technology.
Vendor onboarding, or supplier onboarding, is a tricky yet extremely meticulous process. Supplier relationship management is a systematic process that allows businesses and organizations to collect documentation and data to qualify, approve and contact vendors, purchase goods or services and make timely payments to supply partners. Vendor onboarding compliance is tough as numerous steps are involved.
A vendor or a supplier is an entity that sells any specific product or service to your business, either for your business to sell it or as part of an item that you resell. The vendor onboarding process for e-commerce or other businesses is pretty much similar to employee onboarding, in which new members of a business learn about a company’s practices, processes, compliance, expectations, etc. There’s a lot to understand about supplier and vendor onboarding, doing it wrong can open the business to countless frauds.
A proper and flawless vendor onboarding checklist can help your business to avoid hefty mistakes. An improper vendor and supplier onboarding process can lead your organization to legal and compliance risks. There are some best practices that you can follow to bypass the vendor onboarding challenges.
Before onboarding a vendor, your business should list and understand all the local, and global legal and compliance issues that apply to your industry and business. This assists in better vendor onboarding compliances.
Read and understand all the technical challenges of supplier onboarding related to your business type. Education can lead to a better understanding of how to secure your business against supplier and vendor fraud.
Reduce your chances of risk and fraud by pre-qualifying vendors. Prepare a list of vendors based on their track record, willingness, and ability to meet up your organizational needs. This way you won’t be blindsided while onboarding a vendor. Verification can be done using vendor onboarding documents and ID verification solutions.
Each vendor and supplier needs to have different types of contracts. To successfully onboard a vendor, you may want to build additional governance for strategically important suppliers. The best vendor onboarding solutions can help you in verifying your vendors and assist in building contracts.
It is always a good choice to secure your financial information from vendors, suppliers, and other third-party suppliers. You should use the latest technology and other solutions to verify if the vendors are legit and won’t cause any future problems.
Design your vendor onboarding process with global compliance rules in mind and a proper idea of business that aligns with your business needs. Your strategies need to benefit your business and support your financial goals.
Tracking data is always an important part of any onboarding process, be it employee onboarding or vendor onboarding. With constant data analysis, you can learn where to make improvements in your process.
You need to make sure that every member of your team understands the steps of the onboarding process and the software that is used to verify vendor identities and documents.
Provide timelines and make sure your vendors follow through with them. Your team should be able to manage and deliver a plan. Your vendors should be aware of what you’re expecting of them, share this information with your vendors, and manage your expectations.
Mistakes that are made during vendor onboarding are typically failures related to accountability, planning, compliance, and training. Now that you know what is vendor onboarding process is, the next step is to save organizations from risks. The best way to avoid mistakes is by following the best practices mentioned above and making sure to not make common mistakes. Avoiding vendor onboarding mistakes can offer great benefits to your company.
Here are all mistakes you need to avoid during the Vendor onboarding process for e-commerce and other industries.
Shifting your procurement and vendor relationships from old processes to a more strategic function offers benefits beyond competitiveness, it also helps improve efficiency, mitigating risks, better relationships, and a better brand reputation. Here are all the benefits that come along with a proper business onboarding process:
Automation is always good, there are three main components that a business should consider for vendor onboarding:
Your cost for vendor onboarding depends on the size of your business operation and the number of vendors you are currently working with. If you already have good working relations with a variety of vendors then you will need a system that can handle your growing needs.
During the pandemic, the number of onboarding frauds has grown exponentially. According to a report by Bnn Bloomberg, NASA incurred a loss of $700 million due to the supply of faulty aluminum products. To avoid this income and productivity loss, businesses need to use solutions that can help verify vendors during the onboarding process. Vendor onboarding documents and ID verification are crucial for mitigating fraud.
DIRO’s online verification solution can reduce fraud, improve business relations and improve productivity. DIRO’s solution can verify vendor documents in an instant and assist in complying with AML regulations. The output of the solution is a court-admissible document with forensic data and a digital hash that makes the documents immutable. Being able to differentiate between legit and fake vendors during the first part of the onboarding process is something that every business needs.