In 2023, vendor fraud was the second highest type of fraud targeting US companies — leading to financial loss and jeopardizing many vendor relations. This is why optimizing your supplier management should be a priority for all organizations. Keep reading to learn the 5 best practices to implement now for effective supplier relationship management and protection against third-party fraud.
Trustpair helps protect your supplier relationships. We secure the procure-to-pay process thanks to ongoing data validation. Request a demo to learn more!
Centralize your vendor data management
Supplier management is all about ensuring good relationships with your vendors. And like with any relationship, communication is key. For that, you need to first know where you stand
One of the best practices for supplier management we recommend at Trustpair is to centralize your vendor database.
Concretely, it means using one place (software) to gather all the relevant info, such as:
- Contract terms,
- Purchase orders,
- Invoices,
- Bank account details,
- All other contact and compliance info.
Having this master data centralized will save time on your end and also on your suppliers’ end. No more chasing invoices, or having to check twice for the latest invoice: it’s all there.
It’s more productive for everyone, and it also leads to fewer errors and misunderstandings.
Many supplier relationship management (SRM) software exists nowadays. They’re here to help streamline your procurement processes and also foster collaboration between your vendors and your teams. For example, many supplier management solutions offer dual access so both parties can have visibility and control over what’s happening in real time.
It’s best to stay away from Excel spreadsheets and email chains to gather all your vendor data. They tend to be error-prone, information gets lost all the time, and they’re rarely up to date.
Regardless of your choice of software, implementing a Supplier Management System will help you manage your data and communicate clearly.
In turn, this increases your supply chain agility. Checking supplier contracts or onboarding a new vendor are no longer tedious and time-consuming tasks. This will allow for faster response to any unexpected event, so your organization gains in supplier resilience.
Use analytics
The only way to optimize the performance of your supplier management is to know where you stand nowadays. It might be time to start (or review) the KPIs you have set regarding your vendors.
Here are some criteria to pay attention to:
- Delivery time,
- Costs,
- Quality control,
- ESG standards.
Those KPIs are useful to monitor your overall and individual supplier performance. Analytics are often a feature offered by Supplier Management Software.
However, according to a study recently done by Harvard Business Review, only 21% of procurement leaders reported having strong supplier data analysis capabilities.
Knowing where you stand with your suppliers at all times means you have more control over your supply chain — think, lower costs, improved quality, faster delivery times, etc. It also leads to better decision-making based on the latest data.
At a glance, you can see how your vendors compare and decide in which to strategically invest for your future growth.
Having data-driven supplier relationships is the key to ensuring the future of your business will be as bright as can be!
Streamline your processes
Reviewing your supplier management processes is key to ensuring your resources are well allocated.
The usual supplier management process goes through several steps:
- Supplier qualification: to determine if a potential supplier has the capabilities to provide goods and services that meet your requirements for your supply chain operations.
- Supplier classification: to allocate different vendors to different categories based on your pre-established criteria, leading to a formal choice and the signature of a supplier contract.
- Supplier collaboration: to align your strategic goals to supercharge your relationship with your vendor and foster mutually beneficial growth.
- Supplier evaluation: to control that suppliers meet your contractual requirements (contract management) and perform well.
Teams from accounting, legal, financial services, and procurement spend much time on vendor management. It’s good practice to ask those teams once in a while about the efficacy and safety of the processes they use daily.
For instance, accountants might tell you that it’s hard to do three-way matching of your purchase order, invoice, and payment with the current workflow you use. Or, financial services might want more visibility over which invoices have already been paid to determine cash flow better.
Security is always important, especially with scammers becoming smarter with the use of technology. Cyber fraud is a constant danger for your business, with criminals intent on defrauding companies of their assets such as money and confidential data.
Continually evaluate your supplier risks
Supplier risk management is a must for any organization. It’s all about assessing your suppliers’ strengths and weaknesses and getting curious about what the worst and best-case scenarios are so you can be ready for them.
For example:
- Do you have a plan if your main supplier goes out of business (which is especially key if you sell consumer packaged goods)?
- What if costs increase beyond what you can afford to remain profitable?
- Do you know who your suppliers’ Ultimate Beneficial Owner (UBO) is?
All of those questions need answers — and those answers need to be monitored over time. It’s not enough to check those during your supplier onboarding, it must be a part of your supplier lifecycle management to avoid supply chain disruptions.
Ongoing evaluation of your suppliers’ risks means you’ll be prepared for any eventuality while remaining compliant with your local laws and regulations.
Secure your procure-to-pay process with Trustpair
Last but not least, securing your supplier data is essential for your organization. Too many companies and non-profits have fallen victim to different types of fraud, including vendor fraud.
In vendor fraud, scammers:
- Impersonate your real suppliers (using spoofing) and manage to have you send money to their bank account instead of your real suppliers’.
- Set up a fake company pretending to be your supplier. They use their knowledge of your supplier management process to get their invoices paid for goods and services never rendered.
In 2023, this happened to 47% of companies that were victims of fraud. Other types of fraud include CEO fraud, and wire transfer fraud which always end up the same: with your organization facing direct losses and a PR crisis.
What’s worse, most fraud cases go undetected until it’s too late:
- Fraudsters often manage to hack into your security networks and manually change your suppliers’ master data,
- Or they’ll target one of your employees or executives and convince them to do so manually using social engineering.
Thankfully, using anti-fraud software like Trustpair completely eradicates the risk of third-party fraud.
Our fraud prevention and detection software does ongoing and automatic account validation of your vendor credentials in real-time. We compare your supplier data with international databases to ensure your recipients are who they say they are. If there are any suspicions that the credentials are fraudulent, or have been tampered with without your knowledge, we’ll alert you straight away.
With Trustpair, you always know who you’re paying. You can send your vendors’ payments safely and confidently without having to spend hours doing manual validation. Your team’s time can therefore be used for higher-value tasks, like implementing the other best practices in this article!
For more details about supplier mangement, download our vendor onboarding guide!
Key Takeaways:
- Effective supplier management leads to more productive, compliant, and secure relationships with your vendors.
- Using an anti-fraud solution like Trustpair helps you eradicate the risk of third-party fraud and focus on implementing supplier management best practices.
