New Vendor Setup, Best Practices? 1774
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A recent A/P audit with my company uncovered a concern regarding new vendors being setup through a third party administrator. What is the best practice in regards to verification of a new vendor. You could call them, you could search for them on the net. But, we all have a phone number and it cost next to nothing to set up a web site these days. What is a sure fire procedure, or set of procedures to verify that a vendor business is legitimate in its existence.
Thanks in advance.
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What is a sure fire procedure, or set of procedures to verify that a vendor business is legitimate in its existence
In our current era of scams, phishing attacks, and sophisticated schemes, this is indeed an excellent concern
For major firms, you can run a credit report (e.g., Dun and Bradstreet) or other firms – although this will cost some USDUSDUSD. Still, for major firms, this type of report lets you know if the vendor is on solid ground and viable from a business perspective.
D-and-B’s site … please add www and paste into browser
dnb.com/us/
Other ideas include the business search side of switchboard.com or to Google search a firm. Some of the government agencies, Better Business Bureau, and other service firms may also help here.
I personally like some of the old fashion techniques, like a phone call
Even there be careful as there are vishing attacks (use of voice through disposable cell phones plus phishing – e.g., email sent with a phone # to call, so that cyber-crooks can garner information).
P.S. I voted ‘no’ in the poll … The Accounting and Financial team is one of the most important parts of an organization even if it costs more to have this team in your organization. Some items can be farmed out (e.g., payroll through a service bureau). Still, this resource is valuable in helping with strategy, financing future plans, dealing with immediate operational needs, etc.
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What is a sure fire procedure, or set of procedures to verify that a vendor business is legitimate in its existence
In our current era of scams, phishing attacks, and sophisticated schemes, this is indeed an excellent concern
For major firms, you can run a credit report (e.g., Dun and Bradstreet) or other firms – although this will cost some USDUSDUSD. Still, for major firms, this type of report lets you know if the vendor is on solid ground and viable from a business perspective.
D-and-B’s site … please add www and paste into browser
dnb.com/us/
Other ideas include the business search side of switchboard.com or to Google search a firm. Some of the government agencies, Better Business Bureau, and other service firms may also help here.
I personally like some of the old fashion techniques, like a phone call Even there be careful as there are vishing attacks (use of voice through disposable cell phones plus phishing – e.g., email sent with a phone # to call, so that cyber-crooks can garner information).
P.S. I voted ‘no’ in the poll … The Accounting and Financial team is one of the most important parts of an organization even if it costs more to have this team in your organization. Some items can be farmed out (e.g., payroll through a service bureau). Still, this resource is valuable in helping with strategy, financing future plans, dealing with immediate operational needs, etc.
Thanks Harry.
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What about smaller businesses, or even self employed individuals? I am not sure if a D-and-B report will work for them.
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It would where I’m from
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agree with the above - in addition in Europe you can do VAT checks, call in references etc
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What about smaller businesses, or even self employed individuals? I am not sure if a D-and-B report will work for them.
If you couldn’t obtain a credit report for hopefully what would be rare exceptions, I’d recommend either not doing business with them or special procedures to establish a trusted business relationship. This might include 2-3 references if you need a resource that is specialized and difficult to obtain – that guy you pay USD500 to turn right bolt on the machine
The credit report would validate the legitimacy of the business, plus it might provide clues on any associated financial risks (e.g., are they deep in debt?, are there recent complaints?, etc.). You only need credit reports for new and unknown firms, so hopefully the implementation of this good control would not be too expensive.
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An excerpt from our controls narrative regarding set-up of new vendors -
The Vendor Maintenance team keys requests for adding or updating vendors Master file only if the information required by the system is available(i.e. positive address, name, Tax ID or SS number, telephone, possibly the bank account number). If any information is missing, the vendor maintenance team will either place a call to the vendor or send a letter requesting complete information.