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BUSINESS

Why Your Business is Vulnerable to Supplier Fraud

Why Your Business is Vulnerable to Supplier Fraud 44

 

Why Your Business is Vulnerable to Supplier Fraud 45

Your onboarding and invoicing processes could be your biggest liabilities 

 

By Eric Weitz, Vice President, Business Development of Relish

No business can operate as an island. It takes a trusting relationship across team members, suppliers and behind-the-scenes operations to make any endeavor successful. Trusting third-party vendor relationships is especially crucial since, without them, companies wouldn’t be able to meet customer demands, maintain their inventory, or ship products.

This trust can be tenuous, however, when third-party suppliers choose to act without integrity. Through supplier fraud that manifests as fake accounts that exist in name only, invoice and bank account scams, fraudulent orders, and a host of other deceitful maneuvers, bad actors can inflict irreparable damage to a brand’s reputation and bottom line.

It doesn’t have to be this way. Avoiding supplier scams can be as simple as implementing the right software solutions. Still, most businesses rely solely on trust and manual processes when vetting and working with outside vendors and suppliers. In fact, only 33 percent of companies have an actual inventory of what their third-party vendors are doing. So, it is no surprise that a significant number of businesses (a whopping 84 percent) fall victim to at least one instance of fraud each year.

The Devastating Impact of Invoice Fraud 

It would be easy to assume that industry goliaths are the only ones at risk for this type of activity. Still, small- and medium-sized businesses are more likely to be targeted. And while a few fraudulent invoices may not sound like much, thousands, if not millions, of dollars can be at stake when companies let even a few of these slip through the cracks. For smaller companies and startups, these scams can be devastating.

Account Payable teams are a company’s first line of defense, but many of these team members aren’t sure what to look for. In fact, 31 percent of small businesses don’t know what payment fraud is, and 54 percent don’t have a policy for double-checking invoice details.

While they aren’t as frequently the victim, even heavily staffed powerhouse brands are not immune to this type of fraud. In 2020, Amazon was duped by a $19 million invoice scam led by two brothers who were billing the company for goods that were never actually purchased. Google and Facebook were also tricked by invoice fraud, costing the companies $23 million and $100 million, respectively.

Google and Facebook eventually recovered that money, but it was a rare win. Diesel Jeans cited invoice fraud in its 2019 bankruptcy filing, and toy manufacturer Mattel lost $3 million due to email scams that impersonated its CEO.

Stopping Scams Before They Start 

Preventing supplier fraud comes down to one crucial action: implementing the right B2B apps and enterprise software. With the proper procurement and invoicing systems, organizations can be more resilient in their everyday operations and mitigate fraud across their spend management process—all while saving employee time and resources. Investing in a B2B app suite that strategically extends enterprise technology solutions to bridge common gaps, like supplier onboarding and invoicing, automates the time-consuming, fallible tasks of validating third-party vendor data and digitizing invoices.

This solution was illustrated in a recent case study by an embedded B2B app solutions provider. The study analyzed the experience of a global healthcare medical supply company that manages thousands of suppliers and needed a way to accelerate its supplier onboarding process while sticking to strict international patient privacy standards. Through the adoption of a B2B app, the time-consuming manual supplier registration process was transitioned into an automated validation system, ultimately sifting out fraudulent suppliers before they could strike and saving an average of 30 minutes of employee time per instance.

Minimizing Risk and Streamlining Supplier Validation

Cloud software is an essential component of a security-minded infrastructure, but it is not a one-size-fits-all mechanism. Each company is unique, requiring embedded B2B app solutions that strategically extend enterprise applications to meet the requirements of the organization and industry category. Enterprise applications strive to safeguard against third-party attacks and scams; however, validating supplier data and invoicing remains a manual effort. Even the most highly skilled worker cannot eliminate human error, leaving an opportunity for fraudulent suppliers to exploit.

Partnering with the right B2B applications, on the other hand, can save hours of manual input effort each month, giving companies a competitive edge in the market—an important improvement for a rapidly evolving digital era. AI and machine learning that continues to observe and update without human intervention, resolving errors and adjusting for many unforeseen variables, mean that companies can experience a meaningful improvement to their model without significant change management or extensive integration build.

Every instance of supplier fraud that slips through the cracks means a loss—of finances, brand reputation, and trust. A tailored, strategic combination of enterprise software solutions with the right B2B applications is the key to rooting out those risks before they have a chance to strike.

 

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